Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No.

147817 August 12, 2004

FELICISIMO RIETA, petitioner, vs. PEOPLE OF THE PHILIPPINES, respondent.

DECISION

PANGANIBAN, J.: Corpus delicti refers to the fact of the commission of the crime. It may be proven by the credible testimonies of witnesses, not necessarily by physical evidence. In-court identification of the offender is not essential, as long as the identity of the accused is determined with certainty by relevant evidence. In the present case, there is no doubt that petitioner was the same person apprehended by the authorities and mentioned in the Information. His possession of the smuggled cigarettes carried the prima facie presumption that he was engaged in smuggling. Having failed to rebut this presumption, he may thus be convicted of the crime charged. The Case Before us is a Petition for Review under Rule 45 of the Rules of Court, seeking to set aside the 2 December 22, 2000 Decision of the Court of Appeals (CA) in CA-GR CR No. 17338. The CA affirmed 3 4 with modification the February 18, 1994 Consolidated Judgment of the Regional Trial Court (RTC) of Manila (Branch 46) in Criminal Case Nos. CCC-VI-137(79) and CCC-VI-138(79), finding Felicisimo Rieta guilty of smuggling. The assailed CA Decision disposed as follows: "WHEREFORE, the assailed Decision is hereby MODIFIED as follows: (a) The Court AFFIRMS the decision of the trial court finding Felicisimo Rieta, Arturo Rimorin, Pacifico Teruel and Carmelo Manaois GUILTY BEYOND REASONABLE DOUBT of the crime charged. (b) Appellants Ernesto Miaco, Guillermo Ferrer, Fidel Balita, Robartolo Alincastre and Ernesto de 5 Castro are ACQUITTED as recommended by the Solicitor General." Reconsideration was denied in the April 16, 2001 CA Resolution, which petitioner also assails. Petitioner and his six co-accused -- Arturo Rimorin, Fidel Balita, Gonzalo Vargas, Robartolo Alincastre, Guillermo Ferrer and Ernesto Miaco -- were charged in an Information, which reads: "That on or about October 15, 1979, in the City of Manila, Philippines, the said accused, conspiring and confederating together and helping one another, with the evident intent to defraud
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the government of the Republic of the Philippines of the legitimate duties accruing to it from merchandise imported into this country, did then and there [willfully], unlawfully [and] fraudulently import or bring into the Philippines or assist in so doing contrary to law, three hundred five (305) cases of assorted brands of blue seal cigarettes which are foreign articles valued at P513,663.47 including duties and taxes, and/or buy, sell, transport or assist and facilitate the buying, selling and transporting of the above-named foreign articles after importation knowing the same to have been imported contrary to law which was found in the possession of said accused and under their control which articles said accused fully well knew have not been properly declared and that the duties and specific taxes thereon have not been paid to the proper authorities in violation of said Sec. 3601 of the Tariff and Customs Code of the Philippines, as amended by Presidential Decree No. 34, in relation to Sec. 3602 of said Code and Sec. 184 of the National Internal Revenue 7 Code." The Facts Version of the Prosecution (Respondent) The Office of the Solicitor General (OSG) presents the prosecution's version of the facts as follows: "On October 12, 1979, Col. Panfilo Lacson, the[n] Chief of the Police Intelligence Branch of the Metrocom Intelligence and Security Group (MISG for brevity), received information that certain syndicated groups were engaged in smuggling activities somewhere in Port Area, Manila. It was further revealed that the activities [were being] done at nighttime and the smuggled goods in a delivery panel and delivery truck [were] being escorted by some police and military personnel. He fielded three surveillance stake-out teams the following night along Roxas Boulevard and Bonifacio Drive near Del Pan Bridge, whereby they were to watch out for a cargo truck with Plate No. T-SY-167 bound for Malabon. Nothing came out of it. On the basis of his investigation, [it was discovered that] the truck was registered in the name of Teresita Estacio of Pasay City. "At around 9:00 o'clock in the evening of October 14, 1979, Col. Lacson and his men returned to the same area, with Col. Lacson posting himself at the immediate vicinity of the 2nd COSAC Detachment in Port Area, Manila, because as per information given to him, the said cargo truck will come out from the premises of the 2nd COSAC Detachment. COSAC stands for Constabulary Off-Shore Anti-Crime Battalion. The night watch lasted till the wee hours of the following morning. About 3:00 a.m. an Isuzu panel came out from the place of the 2nd COSAC Detachment. It returned before 4:00 a.m. of [the] same day. "At around 5 minutes before 4:00 o'clock that morning, a green cargo truck with Plate No. T-SY167 came out from the 2nd COSAC Detachment followed and escorted closely by a light brown Toyota Corona car with Plate No. GR-433 and with 4 men on board. At that time, Lt. Col. Panfilo Lacson had no information whatsoever about the car, so he gave an order by radio to his men to intercept only the cargo truck. The cargo truck was intercepted. Col. Lacson noticed that the Toyota car following the cargo truck suddenly made a sharp U-turn towards the North, unlike the cargo truck [that] was going south. Almost by impulse, Col. Lacson's car also made a U-turn and gave chase to the speeding Toyota car, which was running between 100 KPH to 120 KPH. Col. Lacson sounded his siren. The chase lasted for less than 5 minutes until said car made a stop along Bonifacio Drive, at the foot of Del Pan Bridge. Col. Lacson and his men searched the car and they found several firearms, particularly: three (3) .45 cal. Pistols and one (1) armalite M-16 rifle. He also discovered that T/Sgt. Ernesto Miaco was the driver of the Toyota car, and his companions inside the car were Sgt. Guillermo Ferrer, Sgt. Fidel Balita and Sgt. Robartolo Alincastre, [all] belonging to the 2nd COSAC Detachment. They were found not to be equipped with mission orders. "When the cargo truck with Plate No. T-SY-167 was searched, 305 cases of blue seal or untaxed cigarettes were found inside. The cargo truck driver known only as 'Boy' was able to escape while the other passengers or riders of said truck were apprehended, namely: Police Sgt. Arturo
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Rimorin of Pasay City Police Force, Pat. Felicisimo Rieta of Kawit Police Force, and Gonzalo Vargas, a civilian. "x x x xxx xxx

"Lacson's men hauled the intercepted vehicles, the arrested men and confiscated goods to Camp Crame, Quezon City. All the 371 cases (305 + 66) of blue seal cigarettes were turned over to the Bureau of Customs. Sgt. Bienvenido Balaba executed an Affidavit of Arrest together with Arnel Acuba. The Booking and Information Sheet of Ernesto de Castro showed that he was arrested by the MISG after delivering assorted blue seal cigarettes at 185 Sanciangco St., Tonsuya, 9 Malabon." Version of the Defense (Petitioner) Petitioner, on the other hand, denied any knowledge of the alleged smuggling of the blue-seal cigarettes. He sets forth his version of the facts as follows: "Petitioner Rieta testified that he was a policeman assigned at Kawit Cavite. In the early morning of October 15, 1979, he was in Manila together with Boy. He met Boy in 1978 when the latter figured in a vehicular accident in Kawit, Cavite. x x x After a week, Boy visited him at the Kawit Police Station and thereafter, met him four to five times. He learned that Boy was a businessman hauling slippers, fish and vegetables from Divisoria. For several times, he had accompanied Boy on his business trips when [the latter] hauled fish, vegetables and slippers from Divisoria to Cavite. He was requested by Boy to accompany him on his various trips because there were times when policemen on patrol were demanding money from [the latter]. At other times, other policemen accompanied Boy aside from him, on his trips. "In the early morning of October 15, 1979 he met Boy in front of the Kawit Town Hall. He learned that Boy will haul household appliances from Divisoria. They boarded a jeep driven by Boy and they proceeded to Cartimar, Pasay City. At Cartimar, Boy left him at a gasoline station, and told him to standby because Boy will get the cargo truck they will use. When Boy returned, he had companions, who were introduced to him as Gonzalo Vargas and Sgt. Rimorin, the petitioner's co-accused in Criminal Case No. CC-VI-138 (79). From Cartimar, the four (4) of them proceeded to Divisoria and they passed under the Del Pan Bridge. While passing therein, he told Boy that he was hungry, so that when they passed by a small restaurant, he alighted and Sgt. Rimorin followed. Boy told them that he and Gonzalo will proceed to the Port Area and will be back. After thirty to forty five minutes, Boy and Gonzalo returned, and he and Sgt. Rimorin boarded the truck and proceeded to Roxas Boulevard. While they were along Roxas Boulevard near the Daily Express Building, two (2) vehicles intercepted them and ordered them to pull-over. The passengers of the said vehicles introduced themselves as Metrocom soldiers, and ordered them to alight and to raise their hands while poking guns at them. They were ordered to l[ie down] flat on their belly on the pavement and were bodily frisked and searched. The Metrocom soldiers did not find anything from their bodies. Thereafter, they (Rieta, Rimorin and Gonzalo) were ordered by the Metrocom soldiers to transfer to a jeep. While they were aboard the jeep, he overheard from the Metrocom soldiers that their driver was able to escape. Likewise, they were also informed by the Metrocom soldiers that the cargo truck was loaded with blue seal cigarettes. The cargo truck was not opened in their presence, nor were the contents thereof shown to them upon their apprehension. From the time he boarded the cargo truck in Cartimar until he and Sgt. Rimorin alighted to take their snacks, up to the time they were apprehended by the Metrocom soldiers, he had not seen a pack of blue cigarette in the cargo truck. He did not notice whether the Metrocom soldiers opened the cargo truck. At Camp Crame, he was investigated without the benefit of counsel, but, nonetheless, he executed and signed a statement because as far as he was concerned he has done nothing wrong. He was detained at Bicutan for more than a year.

"In the early morning of October 15, 1979 he was not carrying any firearm because he has no mission order to do so, and besides Manila was not his jurisdiction. He was suspended from the service, but was reinstated in January 1981. After he was released from Bicutan, he looked for Boy so that he could clear the matter, but he [did not find] Boy anymore. "In corroboration with the testimony of petitioner Rieta, accused Rimorin, a policeman assigned at Pasay City, testified that the first time he met Boy was in 1978 in the wake and internment of the Late Police Officer Ricardo Escobal. Thereafter, Boy dropped by on several occasions at the Pasay Police Station to request for assistance. Prior to October 15, 1979, Boy again dropped by at the police station and asked him if he had an appointment on the next day. He told Boy that he had no appointment, and the latter requested to accompany him to Sta. Maria, Bulacan to get some rice. Prior thereto, in one of their casual conversations, he learned that Boy was a businessman engaged in hauling various merchandise. He agreed to the request of Boy to accompany him to Sta. Maria, Bulacan. At Sta. Maria, Bulacan, they proceeded to a warehouse containing bags of rice, and they hauled several bags into a truck, and thereafter, proceed[ed] to Quezon City. As compensation Boy gave him a sack of rice. The said transaction was followed by another on October 15, 1979. In the afternoon of October 14, 1979, Boy again dropped by at the police station and requested him to accompany him to haul household fixtures. They usually haul vegetables and rice early in the morning to avoid the traffic and that was the reason why they met in the early morning of October 15, 1979. He told [Boy] that he will see if he will have [the] time, but just the same they made arrangements that they will see each other at Cartimar, Pasay City not later than 2:30 a.m. in the early morning of October 15, 1979. At the appointed time and place, he met Boy with a companion, who was introduced to him as Gonzalo Vargas, his coaccused in the instant case. Thereafter, they proceeded to a gasoline station nearby. At the gasoline station, at the corner of Taylo and Taft Avenue, near Cartimar, they picked up another person who was later on introduced to him as Felicisimo Rieta. Then the four of them (Boy, Gonzalo, Rieta and Rimorin) boarded the cargo truck and they proceeded to Divisoria. It was Boy who drove the cargo truck, while petitioner was seated next to Boy while accused Rimorin and Gonzalo to his right. While enroute to Divisoria, along Roxas Boulevard before reaching Del Pan Bridge, Boy turned right under the bridge. He commented that it was not the route to Divisoria, and Boy answered 'meron lang ikakarga dito'. On the other hand, Rieta told Boy that he was hungry, and thus, Boy pulled-over at a carinderia at Del Pan Bridge near Delgado Bros. When Rieta alighted he followed, while Boy and Gonzalo proceeded. After less than an hour, Boy and Gonzalo returned. They then proceeded towards Roxas Boulevard, Bonifacio Drive, and Boy drove straight at the corner of Aduana to Roxas Boulevard. When he noticed that the truck was not bound for Divisoria as earlier informed, he asked Boy why they were not taking the route going to Divisoria. Boy replied 'bukas na lang wala ng espasyo'. Immediately, they were intercepted by two vehicles and one of the occupants thereof ordered the driver to pull over. The driver pulled over, and they were ordered to raise their hands and to lay flat on their belly on the pavement right in front of the truck, and they were bodily frisked but they found nothing. He asked the Metrocom soldiers what was it all about, but the Metrocom soldiers were shouting 'asan ang blue seal'. Then they were ordered to board a jeep owned by the Metrocom soldiers, and they were brought to Camp Crame. Before they left the area, he did not see the Metrocom soldiers open the cargo truck. He was brought to the MISG at Camp Crame. When they arrived at Camp Crame, the soldiers thereat were clapping their hands, thus he asked 'ano ba talaga ito' and he got an answer from Barrameda, 'yun ang dahilan kung bakit ka makukulong', pointing to a truck. When he saw the truck, it was not the same truck they boarded in the early morning of October 15, 1979. The truck they boarded was galvanized iron pale sheet covered with canvass while the one at Camp Crame was color red and not covered. He entertained the idea that they were being framed-up. Two days after, he was interrogated and the alleged blue seal cigarettes were shown to him, and he was informed by the investigator that the same blue seal cigarettes were the contents of the cargo truck. When the alleged blue seal cigarettes were taken out of the cargo truck, he was not asked to be present. He asked for the whereabouts of Boy, but he was informed that the latter escaped. The more he believed that there was something fishy or wrong in their apprehension. It was very [conspicuous] that the driver was able to escape because at the time they were apprehended they were the only people at Bonifacio Drive, and thus the possibility of

escape was very remote, considering that they were unarmed and the Metrocom soldiers were all fully armed. In both cases at bar, there were about three Pasay policemen who were apprehended. He was detained at Camp Bagong Diwa for more than a year. He knew nothing about the charge against him. When he was at Camp Crame he tried getting in touch with a lawyer and his family, but the MISG did not let him use the telephone." Ruling of the Court of Appeals Affirming the RTC, the CA noted that while petitioner and his co-accused had mainly raised questions of fact, they had nonetheless failed to point out specific errors committed by the trial court in upholding the credibility of the prosecution's witnesses. The defense of denial proffered by petitioner was considered weak and incapable of overturning the overwhelming testimonial and documentary evidence of respondent. Further, the appellate court ruled that the non-presentation in court of the seized blue-seal cigarettes was not fatal to respondent's cause, since the crime had sufficiently been established by other competent evidence. The CA rejected the belated claim of petitioner that his arrest was irregular. It ruled that the alleged defect could not be raised for the first time on appeal, especially in the light of his voluntary submission to and participation in the proceedings before the trial court. The appellate court, however, found no sufficient evidence against the other co-accused who, unlike petitioner, had not been found to be in possession of blue-seal cigarettes. Hence, this Petition.
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Issues In his Memorandum, petitioner submits the following issues for the Court's consideration: "1. The respondents trial and appellate courts committed grave abuse of discretion tantamount to lack and/or excess of jurisdiction when [they] convicted herein petitioner notwithstanding the prosecution's failure to prove the guilt of the petitioner beyond reasonable doubt. "2. The evidence obtained against the accused is inadmissible in evidence because petitioner and his co-accused were arrested without a warrant but by virtue of an arrest and seizure order 12 (ASSO) which was subsequently declared illegal and invalid by this Honorable Supreme Court." The Court's Ruling The Petition has no merit. First Issue: Sufficiency of Evidence Petitioner contends that the existence of the untaxed blue seal cigarettes was not established, because the prosecution had not presented them as evidence. He further argues that there was no crime committed, as the corpus delicti was never proven during the trial. Corpus Delicti Established by Other Evidence We do not agree. Corpus delicti refers to the specific injury or loss sustained. It is the fact of the 14 15 commission of the crime that may be proved by the testimony of eyewitnesses. In its legal sense,
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corpus delicti does not necessarily refer to the body of the person murdered, to the firearms in the crime 17 of homicide with the use of unlicensed firearms, to the ransom money in the crime of kidnapping for 18 19 ransom, or -- in the present case -- to the seized contraband cigarettes. In Rimorin v. People, the petitioner therein similarly equated the actual physical evidence -- 305 cases of blue-seal cigarettes -- with the corpus delicti. The appellate court allegedly erred in not acquitting him on reasonable doubt arising from the non-presentation in court of the confiscated contraband cigarettes. Holding that corpus delicti could be established by circumstantial evidence, the Court debunked his argument thus: "Since the corpus delicti is the fact of the commission of the crime, this Court has ruled that even a single witness' uncorroborated testimony, if credible, may suffice to prove it and warrant a conviction therefor. Corpus delicti may even be established by circumstantial evidence. "Both the RTC and the CA ruled that the corpus delicti had been competently established by respondent's evidence, which consisted of the testimonies of credible witnesses and the Custody Receipt issued by the Bureau of Customs for the confiscated goods. "Col. Panfilo Lacson's testimony on the apprehension of petitioner and on the seizure of the blue seal cigarettes was clear and straightforward. He categorically testified as follows: Q Let us go back to the truck after you apprehended the COSAC soldiers on board the [C]orona car, what did you do thereafter? A Q We took them to the place where the cargo truck was intercepted, Sir. What did you notice thereat?
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A Inside the truck were hundreds of cases of blue seal cigarettes, and I also found out that my men were able to apprehend the occupants of the cargo truck although they reported to me that the driver managed to make good escape, Sir. Q Now you stated that a search was made on the truck and you found how many cases of blue seal cigarettes? A Q A Q A Three hundred five (305) cases, Sir. Blue seal cigarettes? Yes, Sir. What do you mean by blue seal cigarettes? Blue seal cigarettes are untaxed cigarettes, Sir.

Q Did you find out how many were there on board the truck which was intercepted by your men per your order? A Q Yes, Sir, [there] were three. Who?

A Q A Q A Q A

They were P/Sgt. Arturo Rimorin, Sr. P/Sgt. Of what department? Of Pasay City Police Force, Sir, and Pat. Felicisimo Rieta. Of that police department? Of Kawit, Cavite Police Force, and Gonzalo Vargas, Sir. Who is this Gonzalo Vargas? Civilian Sir. xxx xxx xxx

Fiscal Macaraeg: I am showing to you a Custody Receipt dated October 15, 1979, which states: Received from Lt. Col. Rolando N. Abadilla, AC of S, M2/CC, MISG. PC METROCOM (Thru S/Sgt. Rodolfo Bucao, PC) THREE HUNDRED SEVENTY ONE (371) cases of assorted brands of 'Blue Seal' Cigarettes, which were intercepted and confiscated by elements of the MISG, PC METROCOM on or about 0400 15 October 79 along Bonifacio Drive, Manila, which for [purposes] of identification we respectfully request that it be marked [on] evidence as Exhibit 'A'. COURT: Mark it Exhibit 'A'. Fiscal Macaraeg: Q A Will you please do examine Exhibit 'A' and tell us whether this is the same receipt? This is the same receipt, Sir.

Q By the way, were photographs taken of the car as well as the vehicle involved in this case, together with the blue seal cigarettes that were confiscated? A Q A Q A Yes, Sir. Do you have copies of these photographs? The copies are with our evidence custodian, Sir. Can you bring those pictures if required next time? Yes, Sir.

"So, too, did Gregorio Abrigo customs warehouse storekeeper of the Bureau categorically testify that the MISG had turned over to him the seized blue seal cigarettes, for which he issued a Custody Receipt dated October 15, 1979. "We find no reason to depart from the oft repeated doctrine of giving credence to the narration of prosecution witnesses, especially when they are public officers who are presumed to have 21 performed their duties in a regular manner." Petitioner argues that the receipt issued by Abrigo, a customs official, was beset with doubt because: 1) it did not state specifically that the blue-seal cigarettes identified therein had been confiscated from petitioner and turned over to Abrigo by Colonel Lacson and/or his men; and 2) it mentioned 371 (instead of 305) cases of confiscated blue-seal cigarettes. We note, however, that Colonel Lacson himself identified the Custody Receipt as the same one issued for the 305 cases of cigarettes found in the cargo truck, in which petitioner and his co-accused rode, and from which the 66 cases of cigarettes -- subject of Criminal Case No. CCC-VI-138(79) -- were confiscated 22 in Malabon, Metro Manila. This fact (305 plus 66) explains why 371 cases were indicated therein. At any rate, petitioner argues on minor discrepancies that do not affect the integrity of the Receipt, issued in due course by a customs official who was duty-bound to put the seized contraband cigarettes in safekeeping. The existence of the 305 cases of blue-seal cigarettes found in the possession of petitioner and his coaccused was duly proven by the testimonies of the prosecution witnesses -- Lacson and Abrigo. They had testified in compliance with their duty as enforcers of the law. Their testimonies were rightly entitled to full 23 faith and credit, especially because there was no showing of any improper motive on their part to testify falsely against petitioner. Further, the Court accords great respect to the factual conclusions drawn by the 24 trial court, especially when affirmed by the appellate court as in this case. Absurd is the claim of petitioner that, because Colonel Lacson was not the officer who had actually intercepted the cargo truck in which the former rode, the latter's testimony was therefore hearsay. The testimony of the colonel on his participation in the apprehension of the truck sufficiently rebutted this contention. Lacson testified that he had personally received information regarding the smuggling activities being conducted by a syndicated group in that place. He was also informed that smuggled items would be transported from the 2nd COSAC Detachment in the Port Area to Malabon by a cargo truck with Plate No. T-SY-167. During the stakeout surveillance on the night of October 14, 1979, he saw -- from his post within the vicinity of the 2nd COSAC Detachment -- the identified cargo truck coming out of the Port Area. While trailing behind, he radioed his men posted along Roxas Boulevard to stop the truck. Later in court, 25 he described how his men had actually intercepted it. Petitioner insists that Colonel Lacson, who had given chase to a Toyota car and was not among the officers who had intercepted the truck, could not have seen him as one of the passengers of the latter vehicle. Notably, however, the chase of the Toyota car had lasted no more than 5 minutes, and the 26 colonel's team immediately returned to the subject truck after the chase. Lacson, however, categorically said that he had seen 305 cases of blue-seal cigarettes inside the cargo vehicle, and that petitioner was one of its passengers. It should be borne in mind that Colonel Lacson -- as head of that particular surveillance operation -- had full knowledge, control and supervision of the whole process. He had organized the surveillance teams and given orders to his men prior to the apprehension of the vehicles suspected of carrying smuggled items. Furthermore, he was present during the surveillance operations until the apprehension of the cargo truck. Thus, he was clearly competent to testify on the matter.

The denial by petitioner that he was among the occupants of the truck is highly self-serving and riddled with inconsistencies. He had been directly identified as one of its passengers. Besides, he himself admitted that he had been on board the vehicle when it was intercepted, and that there were no other person in the area. Courtroom Identification Unnecessary Next, petitioner belabors the failure of the prosecution to ask Colonel Lacson to identify him in open court. However, the colonel's positive and categorical testimony pointing to him as one of the passengers of the cargo truck, as well as petitioner's own admission of his presence therein, dispelled the need for a courtroom identification. In People v. Quezada, the Court said: "x x x. While positive identification by a witness is required by the law to convict an accused, it need not always be by means of a physical courtroom identification. As the Court held in People v. Paglinawan: 'x x x. Although it is routine procedure for witnesses to point out the accused in open court by way of identification, the fact that the witness x x x did not do so in this case was because the public prosecutor failed to ask her to point out appellant, hence such omission does not in any way affect or diminish the truth or weight of her testimony.' "In-court identification of the offender is essential only when there is a question or doubt on whether the one alleged to have committed the crime is the same person who is charged in the 27 information and subject of the trial." In the present case, there is no doubt that petitioner was a passenger of the truck, that he was apprehended by the authorities, and that he was the same individual charged under the Information in Criminal Case No. CCC-VI-137(79). Prima Facie Proof of Nonpayment of Taxes Sufficient There is no merit, either, in the claim of petitioner that the prosecution failed to prove the nonpayment of the taxes and duties on the confiscated cigarettes. There is an exception to the general rule requiring the prosecution to prove a criminal charge predicated on a negative allegation, or a negative averment constituting an essential element of a crime. In People v. Julian-Fernandez, we held: "Where the negative of an issue does not permit of direct proof, or where the facts are more immediately within the knowledge of the accused, the onus probandi rests upon him. Stated otherwise, it is not incumbent upon the prosecution to adduce positive evidence to support a negative averment the truth of which is fairly indicated by established circumstances and which, if untrue, could readily be disproved by the production of documents or other evidence within the defendant's knowledge or control. For example, where a charge is made that a defendant carried on a certain business without a license x x x, the fact that he has a license is a matter which is peculiar[ly] within his knowledge and he must establish that fact or 28 suffer conviction." (Emphasis supplied) The truth of the negative averment that the duties and specific taxes on the cigarettes were not paid to the proper authorities is fairly indicated by the following circumstances that have been established: (1) the cargo truck, which carried the contraband cigarettes and some passengers including petitioner, immediately came from the 2nd COSAC Detachment; (2) the truck was intercepted at the unholy hour of 4:00 a.m.; (3) it fitted the undisclosed informer's earlier description of it as one that was carrying contraband; and (4) the driver ran away. Hence, it was up to petitioner to disprove these damning

circumstances, simply by presenting the receipts showing payment of the taxes. But he did not do so; all that he could offer was his bare and self-serving denial. Knowledge of the Illegal Nature of Goods The fact that 305 cases of blue-seal cigarettes were found in the cargo truck, in which petitioner and his co-accused were riding, was properly established. Nonetheless, he insists that his presence there was not enough to convict him of smuggling, because the element of illegal possession had not been duly proved. He adds that he had no knowledge that untaxed cigarettes were in the truck. Petitioner's contention is untenable. Persons found to be in possession of smuggled items are presumed to be engaged in smuggling, pursuant to the last paragraph of Section 3601 of the Tariff and Customs Code. The burden of proof is thus shifted to them. To rebut this presumption, it is not enough for petitioner to claim good faith and lack of knowledge of the unlawful source of the cigarettes. He should have presented evidence to support his claim and to convince the court of his noncomplicity. In the case adverted to earlier, Rimorin v. People, we held thus: "In his discussion of a similarly worded provision of Republic Act No. 455, a criminal law authority explained thus: 'In order that a person may be deemed guilty of smuggling or illegal importation under the foregoing statute three requisites must concur: (1) that the merchandise must have been fraudulently or knowingly imported contrary to law; (2) that the defendant, if he is not the importer himself, must have received, concealed, bought, sold or in any manner facilitated the transportation, concealment or sale of the merchandise; and (3) that the defendant must be shown to have knowledge that the merchandise had been illegally imported. If the defendant, however, is shown to have had possession of the illegally imported merchandise, without satisfactory explanation, such possession shall be 30 deemed sufficient to authorize conviction.'" (Emphasis supplied) In the present case, the explanation given by petitioner was found to be unacceptable and incredible by both the RTC and the CA, which said: "Now on the explanations of Police Sgt. Rimorin of Pasay City Police Force and Pat. Rieta of Kawit Police Force, riders in the loaded cargo truck driven by 'Boy.' Their claim that they did not have any knowledge about the cargo of blue seal cigarettes is not given credence by the court. They tried to show lack of knowledge by claiming that along the way, 'Boy' and Gonzalo Vargas left them behind at a certain point for snacks and picked them up later after the cargo had been loaded. The Court cannot see its way through how two policemen, joining 'Boy' in the dead of the night, explicitly to give him and his goods some protection, which service would be paid, yet would not know what they are out to protect. And neither could the Court see reason in 'Boy's' leaving them behind when he was going to pick up and load the blue seal cigarettes. 'Boy' knew the risks. He wanted them for protection, so why will he discard them? How so unnatural and so 31 contrary to reason." Being contrary to human experience, his version of the facts is too pat and stereotyped to be accepted at face value. Evidence, to be believed, not only must proceed from the mouth of a credible witness; it must 32 also be credible in itself, as when it conforms to common experience and observation of humankind.
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The absence of any suspicious reaction on the part of petitioner was not in accordance with human nature. The involvement or participation he and his co-accused had in the smuggling of the goods was confirmed by their lack of proper and reasonable justification for the fact that they had been found inside the cargo truck, seated in front, when it was intercepted by the authorities. Despite his protestation, it is obvious that petitioner was aware of the strange nature of the transaction, and that he was willing to do his part in furtherance thereof. The evidence presented by the prosecution established his work of guarding and escorting the contraband to facilitate its transportation from the Port Area to Malabon, an act punishable under Section 3601 of the Tax Code. Second Issue: Validity of the Search and Seizure Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order (ASSO) No. 4754 was invalid, as the law upon which it was predicated -- General Order No. 60, issued by then President 33 Ferdinand E. Marcos -- was subsequently declared by the Court, in Taada v. Tuvera, to have no force and effect. Thus, he asserts, any evidence obtained pursuant thereto is inadmissible in evidence. We do not agree. In Taada, the Court addressed the possible effects of its declaration of the invalidity of various presidential issuances. Discussing therein how such a declaration might affect acts done on a presumption of their validity, the Court said: "x x x. In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage District vs. Baxter Bank to wit: 'The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. x x x It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to [the determination of its invalidity], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects with respect to particular conduct, private and official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination. These questions are among the most difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified.' xxxx xx xxx

"Similarly, the implementation/enforcement of presidential decrees prior to their publication in the Official Gazette is 'an operative fact which may have consequences which cannot be justly ignored. The past cannot always be erased by a new judicial declaration x x x that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified.'"
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The Chicot doctrine cited in Taada advocates that, prior to the nullification of a statute, there is an imperative necessity of taking into account its actual existence as an operative fact negating the acceptance of "a principle of absolute retroactive invalidity." Whatever was done while the legislative or 35 the executive act was in operation should be duly recognized and presumed to be valid in all respects. The ASSO that was issued in 1979 under General Order No. 60 -- long before our Decision in Taada and the arrest of petitioner -- is an operative fact that can no longer be disturbed or simply ignored.

Furthermore, the search and seizure of goods, suspected to have been introduced into the country in 36 violation of customs laws, is one of the seven doctrinally accepted exceptions to the constitutional provision. Such provision mandates that no search or seizure shall be made except by virtue of a warrant 37 issued by a judge who has personally determined the existence of probable cause. Under the Tariff and Customs Code, a search, seizure and arrest may be made even without a warrant for purposes of enforcing customs and tariff laws. Without mention of the need to priorly obtain a judicial warrant, the Code specifically allows police authorities to enter, pass through or search any land, enclosure, warehouse, store or building that is not a dwelling house; and also to inspect, search and examine any vessel or aircraft and any trunk, package, box or envelope or any person on board; or to stop and search and examine any vehicle, beast or person suspected of holding or conveying any 38 dutiable or prohibited article introduced into the Philippines contrary to law. WHEREFORE, the Petition is DENIED, and the assailed Decision AFFIRMED. Costs against petitioner. SO ORDERED. Sandoval-Gutierrez, Corona, and Carpio Morales, JJ., concur.
*

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 158540 July 8, 2004

SOUTHERN CROSS CEMENT CORPORATION, petitioner, vs. THE PHILIPPINE CEMENT MANUFACTURERS CORP., THE SECRETARY OF THE DEPARTMENT OF TRADE & INDUSTRY, THE SECRETARY OF THE DEPARTMENT OF FINANCE, and THE COMMISSIONER OF THE BUREAU OF CUSTOMS, respondents.

DECISION

TINGA, J.: "Good fences make good neighbors," so observed Robert Frost, the archetype of traditional New England detachment. The Frost ethos has been heeded by nations adjusting to the effects of the liberalized global 1 market. The Philippines, for one, enacted Republic Act (Rep. Act) No. 8751 (on the imposition of countervailing duties), Rep. Act No. 8752 (on the imposition of anti-dumping duties) and, finally, Rep. Act 2 No. 8800, also known as the Safeguard Measures Act ("SMA") soon after it joined the General 3 Agreement on Tariff and Trade (GATT) and the World Trade Organization (WTO) Agreement.

The SMA provides the structure and mechanics for the imposition of emergency measures, including tariffs, to protect domestic industries and producers from increased imports which inflict or could inflict 4 serious injury on them. The wisdom of the policies behind the SMA, however, is not put into question by the petition at bar. The questions submitted to the Court relate to the means and the procedures ordained in the law to ensure that the determination of the imposition or non-imposition of a safeguard measure is proper. Antecedent Facts Petitioner Southern Cross Cement Corporation ("Southern Cross") is a domestic corporation engaged in the business of cement manufacturing, production, importation and exportation. Its principal stockholders are Taiheiyo Cement Corporation and Tokuyama Corporation, purportedly the largest cement 5 manufacturers in Japan. Private respondent Philippine Cement Manufacturers Corporation ("Philcemcor") is an association of 7 domestic cement manufacturers. It has eighteen (18) members, per Record. While Philcemcor heralds itself to be an association of domestic cement manufacturers, it appears that considerable equity holdings, if not controlling interests in at least twelve (12) of its member-corporations, were acquired by the three largest cement manufacturers in the world, namely Financiere Lafarge S.A. of France, Cemex S.A. de C.V. of Mexico, and Holcim Ltd. of Switzerland (formerly Holderbank Financiere Glaris, Ltd., then 8 Holderfin B.V.). On 22 May 2001, respondent Department of Trade and Industry ("DTI") accepted an application from 9 Philcemcor, alleging that the importation of gray Portland cement in increased quantities has caused declines in domestic production, capacity utilization, market share, sales and employment; as well as caused depressed local prices. Accordingly, Philcemcor sought the imposition at first of provisional, then later, definitive safeguard measures on the import of cement pursuant to the SMA. Philcemcor filed the 10 application in behalf of twelve (12) of its member-companies. After preliminary investigation, the Bureau of Import Services of the DTI, determined that critical 11 circumstances existed justifying the imposition of provisional measures. On 7 November 2001, the DTI issued an Order,imposing a provisional measure equivalent to Twenty Pesos and Sixty Centavos (P20.60) per forty (40) kilogram bag on all importations of gray Portland cement for a period not exceeding two hundred (200) days from the date of issuance by the Bureau of Customs (BOC) of the 12 implementing Customs Memorandum Order. The corresponding Customs Memorandum Order was issued on 10 December 2001, to take effect that same day and to remain in force for two hundred (200) 13 days. In the meantime, the Tariff Commission, on 19 November 2001, received a request from the DTI for a formal investigation to determine whether or not to impose a definitive safeguard measure on imports of gray Portland cement, pursuant to Section 9 of the SMA and its Implementing Rules and Regulations. A notice of commencement of formal investigation was published in the newspapers on 21 November 2001. Individual notices were likewise sent to concerned parties, such as Philcemcor, various importers and exporters, the Embassies of Indonesia, Japan and Taiwan, contractors/builders associations, industry associations, cement workers' groups, consumer groups, non-government organizations and concerned 14 government agencies. A preliminary conference was held on 27 November 2001, attended by several 15 concerned parties, including Southern Cross. Subsequently, the Tariff Commission received several 16 position papers both in support and against Philcemcor's application. The Tariff Commission also visited the corporate offices and manufacturing facilities of each of the applicant companies, as well as that of 17 Southern Cross and two other cement importers. On 13 March 2002, the Tariff Commission issued its Formal Investigation Report ("Report"). Among the factors studied by the Tariff Commission in its Report were the market share of the domestic
6

industry, production and sales, capacity utilization, financial performance and profitability, 22 return on sales. The Tariff Commission arrived at the following conclusions:

18

19

20

21

and

1. The circumstances provided in Article XIX of GATT 1994 need not be demonstrated since the product under consideration (gray Portland cement) is not the subject of any Philippine obligation or tariff concession under the WTO Agreement. Nonetheless, such inquiry is governed by the national legislation (R.A. 8800) and the terms and conditions of the Agreement on Safeguards. 2. The collective output of the twelve (12) applicant companies constitutes a major proportion of the total domestic production of gray Portland cement and blended Portland cement. 3. Locally produced gray Portland cement and blended Portland cement (Pozzolan) are "like" to imported gray Portland cement. 4. Gray Portland cement is being imported into the Philippines in increased quantities, both in absolute terms and relative to domestic production, starting in 2000. The increase in volume of imports is recent, sudden, sharp and significant. 5. The industry has not suffered and is not suffering significant overall impairment in its condition, i.e., serious injury. 6. There is no threat of serious injury that is imminent from imports of gray Portland cement. 7. Causation has become moot and academic in view of the negative determination of the 23 elements of serious injury and imminent threat of serious injury. Accordingly, the Tariff Commission made the following recommendation, to wit: The elements of serious injury and imminent threat of serious injury not having been established, it is hereby recommended that no definitive general safeguard measure be imposed on the 24 importation of gray Portland cement. The DTI received the Report on 14 March 2002. After reviewing the report, then DTI Secretary Manuel Roxas II ("DTI Secretary") disagreed with the conclusion of the Tariff Commission that there was no 25 serious injury to the local cement industry caused by the surge of imports. In view of this disagreement, the DTI requested an opinion from the Department of Justice ("DOJ") on the DTI Secretary's scope of options in acting on the Commission's recommendations. Subsequently, then DOJ Secretary Hernando Perez rendered an opinion stating that Section 13 of the SMA precluded a review by the DTI Secretary of the Tariff Commission's negative finding, or finding that a definitive safeguard measure should not be 26 imposed. On 5 April 2002, the DTI Secretary promulgated a Decision. After quoting the conclusions of the Tariff Commission, the DTI Secretary noted the DTI's disagreement with the conclusions. However, he also cited the DOJ Opinion advising the DTI that it was bound by the negative finding of the Tariff Commission. Thus, he ruled as follows: The DTI has no alternative but to abide by the [Tariff] Commission's recommendations. IN VIEW OF THE FOREGOING, and in accordance with Section 13 of RA 8800 which states: "In the event of a negative final determination; or if the cash bond is in excess of the definitive safeguard duty assessed, the Secretary shall immediately issue, through the Secretary of Finance, a written instruction to the Commissioner of

Customs, authorizing the return of the cash bond or the remainder thereof, as the case may be, previously collected as provisional general safeguard measure within ten (10) days from the date a final decision has been made; Provided, that the government shall not be liable for any interest on the amount to be returned. The Secretary shall not accept for consideration another petition from the same industry, with respect to the same imports of the product under consideration within one (1) year after the date of rendering such a decision." The DTI hereby issues the following: The application for safeguard measures against the importation of gray Portland cement filed by 27 PHILCEMCOR (Case No. 02-2001) is hereby denied. (Emphasis in the original) Philcemcor received a copy of the DTI Decision on 12 April 2002. Ten days later, it filed with the Court of 28 Appeals a Petition for Certiorari, Prohibition and Mandamus seeking to set aside the DTI Decision, as well as the Tariff Commission's Report. Philcemcor likewise applied for a Temporary Restraining Order/Injunctionto enjoin the DTI and the BOC from implementing the questioned Decision and Report. It prayed that the Court of Appeals direct the DTI Secretary to disregard the Report and to render judgment independently of the Report. Philcemcor argued that the DTI Secretary, vested as he is under the law with the power of review, is not bound to adopt the recommendations of the Tariff Commission; and, that the Report is void, as it is predicated on a flawed framework, inconsistent inferences and erroneous 29 methodology. On 10 June 2002, Southern Cross filed its Comment. It argued that the Court of Appeals had no jurisdiction over Philcemcor's Petition, for it is on the Court of Tax Appeals ("CTA") that the SMA conferred jurisdiction to review rulings of the Secretary in connection with the imposition of a safeguard measure. It likewise argued that Philcemcor's resort to the special civil action of certiorari is improper, considering that what Philcemcor sought to rectify is an error of judgment and not an error of jurisdiction or grave abuse of discretion, and that a petition for review with the CTA was available as a plain, speedy and adequate remedy. Finally, Southern Cross echoed the DOJ Opinion that Section 13 of the SMA precludes a review by the DTI Secretary of a negative finding of the Tariff Commission. After conducting a hearing on 19 June 2002 on Philcemcor's application for preliminary injunction, the 31 32 Court of Appeals' Twelfth Division granted the writ sought in its Resolution dated 21 June 2002. Seven days later, on 28 June 2002, the two-hundred (200)-day period for the imposition of the provisional measure expired. Despite the lapse of the period, the BOC continued to impose the provisional measure on all importations of Portland cement made by Southern Cross. The uninterrupted assessment of the tariff, according to Southern Cross, worked to its detriment to the point that the continued imposition 33 would eventually lead to its closure. Southern Cross timely filed a Motion for Reconsideration of the Resolution on 9 September 2002. Alleging that Philcemcor was not entitled to provisional relief, Southern Cross likewise sought a clarificatory order as to whether the grant of the writ of preliminary injunction could extend the earlier imposition of the provisional measure beyond the two hundred (200)-day limit imposed by law. The appeals' court failed to take immediate action on Southern Cross's motion despite the four (4) motions for early resolution the latter filed between September of 2002 and February of 2003. After six (6) months, on 19 February 2003, the Court of Appeals directed Philcemcor to comment on Southern Cross's Motion for 34 35 Reconsideration. After Philcemcor filed itsOpposition on 13 March 2003, Southern Cross filed another set of four (4) motions for early resolution. Despite the efforts of Southern Cross, the Court of Appeals failed to directly resolve the Motion for 36 Reconsideration. Instead, on 5 June 2003, it rendered a Decision, granting in part Philcemcor's petition. The appellate court ruled that it had jurisdiction over the petition for certiorari since it alleged grave abuse of discretion. It refused to annul the findings of the Tariff Commission, citing the rule that factual findings
30

of administrative agencies are binding upon the courts and its corollary, that courts should not interfere in matters addressed to the sound discretion and coming under the special technical knowledge and training 37 of such agencies. Nevertheless, it held that the DTI Secretary is not bound by the factual findings of the Tariff Commission since such findings are merely recommendatory and they fall within the ambit of the Secretary's discretionary review. It determined that the legislative intent is to grant the DTI Secretary the 38 power to make a final decision on the Tariff Commission's recommendation. The dispositive portion of the Decision reads: WHEREFORE, based on the foregoing premises, petitioner's prayer to set aside the findings of the Tariff Commission in its assailed Report dated March 13, 2002 is DENIED. On the other hand, the assailed April 5, 2002 Decision of the Secretary of the Department of Trade and Industry is hereby SET ASIDE. Consequently, the case is REMANDED to the public respondent Secretary of Department of Trade and Industry for a final decision in accordance with RA 8800 and its Implementing Rules and Regulations. SO ORDERED.
39

On 23 June 2003, Southern Cross filed the present petition, assailing the appellate court's Decision for departing from the accepted and usual course of judicial proceedings, and not deciding the substantial questions in accordance with law and jurisprudence. The petition argues in the main that the Court of Appeals has no jurisdiction over Philcemcor's petition, the proper remedy being a petition for review with the CTA conformably with the SMA, and; that the factual findings of the Tariff Commission on the existence or non-existence conditions warranting the imposition of general safeguard measures are binding upon the DTI Secretary. The timely filing of Southern Cross's petition before this Court necessarily prevented the Court of 40 AppealsDecision from becoming final. Yet on 25 June 2003, the DTI Secretary issued a new Decision, ruling this time that that in light of the appellate court's Decision there was no longer any legal impediment 41 to his deciding Philcemcor's application for definitive safeguard measures. He made a determination that, contrary to the findings of the Tariff Commission, the local cement industry had suffered serious 42 injury as a result of the import surges. Accordingly, he imposed a definitive safeguard measure on the importation of gray Portland cement, in the form of a definitive safeguard duty in the amount of P20.60/40 43 kg. bag for three years on imported gray Portland Cement. On 7 July 2003, Southern Cross filed with the Court a "Very Urgent Application for a Temporary Restraining Order and/or A Writ of Preliminary Injunction" ("TRO Application"), seeking to enjoin the DTI Secretary from enforcing his Decision of 25 June 2003 in view of the pending petition before this Court. Philcemcor filed an opposition, claiming, among others, that it is not this Court but the CTA that has jurisdiction over the application under the law. On 1 August 2003, Southern Cross filed with the CTA a Petition for Review, assailing the DTI Secretary's 25 June 2003 Decision which imposed the definite safeguard measure. Prescinding from this action, Philcemcor filed with this Court a Manifestation and Motion to Dismiss in regard to Southern Cross's petition, alleging that it deliberately and willfully resorted to forum-shopping. It points out that Southern Cross's TRO Applicationseeks to enjoin the DTI Secretary's second decision, while its Petition before the 44 CTA prays for the annulment of the same decision. Reiterating its Comment on Southern Cross's Petition for Review, Philcemcor also argues that the CTA, being a special court of limited jurisdiction, could only review the ruling of the DTI Secretary when a safeguard measure is imposed, and that the factual findings of the Tariff Commission are not binding on 45 the DTI Secretary. After giving due course to Southern Cross's Petition, the Court called the case for oral argument on 18 46 February 2004. At the oral argument, attended by the counsel for Philcemcor and Southern Cross and

the Office of the Solicitor General, the Court simplified the issues in this wise: (i) whether the Decision of the DTI Secretary is appealable to the CTA or the Court of Appeals; (ii) assuming that the Court of Appeals has jurisdiction, whether its Decision is in accordance with law; and, (iii) whether a Temporary 47 Restraining Order is warranted. During the oral arguments, counsel for Southern Cross manifested that due to the imposition of the general safeguard measures, Southern Cross was forced to cease operations in the Philippines in 48 November of 2003. Propriety of the Temporary Restraining Order Before the merits of the Petition, a brief comment on Southern Cross's application for provisional relief. It sought to enjoin the DTI Secretary from enforcing the definitive safeguard measure he imposed in his 25 June 2003 Decision. The Court did not grant the provisional relief for it would be tantamount to enjoining 49 the collection of taxes, a peremptory judicial act which is traditionally frowned upon, unless there is a 50 clear statutory basis for it. In that regard, Section 218 of the Tax Reform Act of 1997 prohibits any court from granting an injunction to restrain the collection of any national internal revenue tax, fee or charge 51 imposed by the internal revenue code. A similar philosophy is expressed by Section 29 of the SMA, which states that the filing of a petition for review before the CTA does not stop, suspend, or otherwise toll the imposition or collection of the appropriate tariff duties or the adoption of other appropriate safeguard 52 measures. This evinces a clear legislative intent that the imposition of safeguard measures, despite the availability of judicial review, should not be enjoined notwithstanding any timely appeal of the imposition. The Forum-Shopping Issue In the same breath, we are not convinced that the allegation of forum-shopping has been duly proven, or that sanction should befall upon Southern Cross and its counsel. The standard by Section 5, Rule 7 of the 1997 Rules of Civil Procedure in order that sanction may be had is that "the acts of the party or his 53 counsel clearly constitute willful and deliberate forum shopping." The standard implies a malicious intent to subvert procedural rules, and such state of mind is not evident in this case. The Jurisdictional Issue On to the merits of the present petition. In its assailed Decision, the Court of Appeals, after asserting only in brief that it had jurisdiction over Philcemcor's Petition, discussed the issue of whether or not the DTI Secretary is bound to adopt the negative recommendation of the Tariff Commission on the application for safeguard measure. The Court of Appeals maintained that it had jurisdiction over the petition, as it alleged grave abuse of discretion on the part of the DTI Secretary, thus: A perusal of the instant petition reveals allegations of grave abuse of discretion on the part of the DTI Secretary in rendering the assailed April 5, 2002 Decision wherein it was ruled that he had no alternative but to abide by the findings of the Commission on the matter of safeguard measures for the local cement industry. Abuse of discretion is admittedly within the ambit of certiorari. Grave abuse of discretion implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. It is alleged that, in the assailed Decision, the DTI Secretary gravely abused his discretion in wantonly evading to discharge his duty to render an independent 54 determination or decision in imposing a definitive safeguard measure. We do not doubt that the Court of Appeals' certiorari powers extend to correcting grave abuse of 55 discretion on the part of an officer exercising judicial or quasi-judicial functions. However, the special

civil action of certiorari is available only when there is no plain, speedy and adequate remedy in the 56 ordinary course of law. Southern Cross relies on this limitation, stressing that Section 29 of the SMA is a plain, speedy and adequate remedy in the ordinary course of law which Philcemcor did not avail of. The Section reads: Section 29. Judicial Review. Any interested party who is adversely affected by the ruling of the Secretary in connection with the imposition of a safeguard measure may file with the CTA, a petition for review of such ruling within thirty (30) days from receipt thereof. Provided, however, that the filing of such petition for review shall not in any way stop, suspend or otherwise toll the imposition or collection of the appropriate tariff duties or the adoption of other appropriate safeguard measures, as the case may be. The petition for review shall comply with the same requirements and shall follow the same rules of procedure and shall be subject to the same disposition as in appeals in connection with 57 adverse rulings on tax matters to the Court of Appeals. (Emphasis supplied) It is not difficult to divine why the legislature singled out the CTA as the court with jurisdiction to review the ruling of the DTI Secretary in connection with the imposition of a safeguard measure. The Court has long recognized the legislative determination to vest sole and exclusive jurisdiction on matters involving 58 internal revenue and customs duties to such a specialized court. By the very nature of its function, the CTA is dedicated exclusively to the study and consideration of tax problems and has necessarily 59 developed an expertise on the subject. At the same time, since the CTA is a court of limited jurisdiction, its jurisdiction to take cognizance of a 60 case should be clearly conferred and should not be deemed to exist on mere implication. Concededly, Rep. Act No. 1125, the statute creating the CTA, does not extend to it the power to review decisions of 61 the DTI Secretary in connection with the imposition of safeguard measures. Of course, at that time which was before the advent of trade liberalization the notion of safeguard measures or safety nets was not yet in vogue. Undeniably, however, the SMA expanded the jurisdiction of the CTA by including review of the rulings of the DTI Secretary in connection with the imposition of safeguard measures. However, Philcemcor and the public respondents agree that the CTA has appellate jurisdiction over a decision of the DTI Secretary imposing a safeguard measure, but not when his ruling is not to impose such measure. In a related development, Rep. Act No. 9282, enacted on 30 March 2004, expressly vests unto the CTA jurisdiction over "[d]ecisions of the Secretary of Trade and Industry, in case of nonagricultural product, commodity or article xxx involving xxx safeguard measures under Republic Act No. 8800, where 62 either party may appeal the decision to impose or not to impose said duties ." Had Rep. Act No. 9282 already been in force at the beginning of the incidents subject of this case, there would have been no need to make any deeper inquiry as to the extent of the CTA's jurisdiction. But as Rep. Act No. 9282 cannot be applied retroactively to the present case, the question of whether such jurisdiction extends to a decision not to impose a safeguard measure will have to be settled principally on the basis of the SMA. Under Section 29 of the SMA, there are three requisites to enable the CTA to acquire jurisdiction over the petition for review contemplated therein: (i) there must be a ruling by the DTI Secretary; (ii) the petition must be filed by an interested party adversely affected by the ruling; and (iii) such ruling must be in connection with the imposition of a safeguard measure. The first two requisites are clearly present. The third requisite deserves closer scrutiny. Contrary to the stance of the public respondents and Philcemcor, in this case where the DTI Secretary decides not to impose a safeguard measure, it is the CTA which has jurisdiction to review his decision. The reasons are as follows:

First. Split jurisdiction is abhorred. Essentially, respondents' position is that judicial review of the DTI Secretary's ruling is exercised by two different courts, depending on whether or not it imposes a safeguard measure, and in either case the court exercising jurisdiction does so to the exclusion of the other. Thus, if the DTI decision involves the imposition of a safeguard measure it is the CTA which has appellate jurisdiction; otherwise, it is the Court of Appeals. Such setup is as novel and unusual as it is cumbersome and unwise. Essentially, respondents advocate that Section 29 of the SMA has established split appellate jurisdiction over rulings of the DTI Secretary on the imposition of safeguard measure. This interpretation cannot be favored, as the Court has consistently refused to sanction split 63 jurisdiction. The power of the DTI Secretary to adopt or withhold a safeguard measure emanates from the same statutory source, and it boggles the mind why the appeal modality would be such that one appellate court is qualified if what is to be reviewed is a positive determination, and it is not if what is appealed is a negative determination. In deciding whether or not to impose a safeguard measure, provisional or general, the DTI Secretary would be evaluating only one body of facts and applying them to one set of laws. The reviewing tribunal will be called upon to examine the same facts and the same laws, whether or not the determination is positive or negative. In short, if we were to rule for respondents we would be confirming the exercise by two judicial bodies of jurisdiction over basically the same subject matterprecisely the split-jurisdiction situation which is 64 anathema to the orderly administration of justice. The Court cannot accept that such was the legislative motive especially considering that the law expressly confers on the CTA, the tribunal with the specialized competence over tax and tariff matters, the role of judicial review without mention of any other court that may exercise corollary or ancillary jurisdiction in relation to the SMA. The provision refers to the Court of Appeals but only in regard to procedural rules and dispositions of appeals from the CTA to the Court of 65 Appeals. The principle enunciated in Tejada v. Homestead Property Corporation
66

is applicable to the case at bar:

The Court agrees with the observation of the [that] when an administrative agency or body is conferred quasi-judicial functions, all controversies relating to the subject matter pertaining to its specialization are deemed to be included within the jurisdiction of said 67 administrative agency or body. Split jurisdiction is not favored. Second. The interpretation of the provisions of the SMA favors vesting untrammeled appellate jurisdiction on the CTA. A plain reading of Section 29 of the SMA reveals that Congress did not expressly bar the CTA from reviewing a negative determination by the DTI Secretary nor conferred on the Court of Appeals such review authority. Respondents note, on the other hand, that neither did the law expressly grant to the CTA the power to review a negative determination. However, under the clear text of the law, the CTA is vested with jurisdiction to review the ruling of the DTI Secretary " in connection with the imposition of a safeguard measure." Had the law been couched instead to incorporate the phrase "the ruling imposing a safeguard measure," then respondent's claim would have indisputable merit. Undoubtedly, the phrase "in connection with" not only qualifies but clarifies the succeeding phrase "imposition of a safeguard measure." As expounded later, the phrase also encompasses the opposite or converse ruling which is the non-imposition of a safeguard measure. In the American case of Shaw v. Delta Air Lines, Inc., the United States Supreme Court, in interpreting a key provision of the Employee Retirement Security Act of 1974, construed the phrase "relates to" in its 69 normal sense which is the same as "if it has connection with or reference to." There is no serious dispute that the phrase "in connection with" is synonymous to "relates to" or "reference to," and that all three phrases are broadly expansive. This is affirmed not just by jurisprudential fiat, but also the acquired
68

connotative meaning of "in connection with" in common parlance. Consequently, with the use of the phrase "in connection with," Section 29 allows the CTA to review not only the ruling imposing a safeguard measure, but all other rulings related or have reference to the application for such measure . Now, let us determine the maximum scope and reach of the phrase "in connection with" as used in Section 29 of the SMA. A literalist reading or linguistic survey may not satisfy. Even the US Supreme 70 Court in New York State Blue Cross Plans v. Travelers Ins. conceded that the phrases "relate to" or "in connection with" may be extended to the farthest stretch of indeterminacy for, universally, relations or 71 connections are infinite and stop nowhere. Thus, in the case the US High Court, examining the same phrase of the same provision of law involved in Shaw, resorted to looking at the statute and its objectives 72 as the alternative to an "uncritical literalism." A similar inquiry into the other provisions of the SMA is in 73 order to determine the scope of review accorded therein to the CTA. The authority to decide on the safeguard measure is vested in the DTI Secretary in the case of nonagricultural products, and in the Secretary of the Department of Agriculture in the case of agricultural 74 products. Section 29 is likewise explicit that only the rulings of the DTI Secretary or the Agriculture 75 Secretary may be reviewed by the CTA. Thus, the acts of other bodies that were granted some powers by the SMA, such as the Tariff Commission, are not subject to direct review by the CTA. Under the SMA, the Department Secretary concerned is authorized to decide on several matters. Within thirty (30) days from receipt of a petition seeking the imposition of a safeguard measure, or from the date he mademotu proprio initiation, the Secretary shall make a preliminary determination on whether the increased imports of the product under consideration substantially cause or threaten to cause serious 76 injury to the domestic industry. Such ruling is crucial since only upon the Secretary's positive preliminary determination that a threat to the domestic industry exists shall the matter be referred to the Tariff Commission for formal investigation, this time, to determine whether the general safeguard measure 77 should be imposed or not. Pursuant to a positive preliminary determination, the Secretary may also decide that the imposition of a provisional safeguard measure would be warranted under Section 8 of the 78 SMA. The Secretary is also authorized to decide, after receipt of the report of the Tariff Commission, whether or not to impose the general safeguard measure, and if in the affirmative, what general 79 safeguard measures should be applied. Even after the general safeguard measure is imposed, the 80 Secretary is empowered to extend the safeguard measure, or terminate, reduce or modify his previous 81 rulings on the general safeguard measure. With the explicit grant of certain powers involving safeguard measures by the SMA on the DTI Secretary, it follows that he is empowered to rule on several issues. These are the issues which arise in connection with, or in relation to, the imposition of a safeguard measure. They may arise at different stages the preliminary investigation stage, the post-formal investigation stage, or the post-safeguard measure stage yet all these issues do become ripe for resolution because an initiatory action has been taken seeking the imposition of a safeguard measure. It is the initiatory action for the imposition of a safeguard measure that sets the wheels in motion, allowing the Secretary to make successive rulings, beginning with the preliminary determination. Clearly, therefore, the scope and reach of the phrase "in connection with," as intended by Congress, pertain to all rulings of the DTI Secretary or Agriculture Secretary which arise from the time an application or motu proprioinitiation for the imposition of a safeguard measure is taken. Indeed, the incidents which require resolution come to the fore only because there is an initial application or action seeking the imposition of a safeguard measure. From the legislative standpoint, it was a matter of sense and practicality to lump up the questions related to the initiatory application or action for safeguard measure and to assign only one court and; that is the CTA to initially review all the rulings related to such initiatory application or action. Both directions Congress put in place by employing the phrase "in connection with" in the law. Given the relative expanse of decisions subject to judicial review by the CTA under Section 29, we do not doubt that a negative ruling refusing to impose a safeguard measure falls within the scope of its

jurisdiction. On a literal level, such negative ruling is "a ruling of the Secretary in connection with the imposition of a safeguard measure," as it is one of the possible outcomes that may result from the initial application or action for a safeguard measure. On a more critical level, the rulings of the DTI Secretary in connection with a safeguard measure, however diverse the outcome may be, arise from the same grant 82 of jurisdiction on the DTI Secretary by the SMA. The refusal by the DTI Secretary to grant a safeguard measure involves the same grant of authority, the same statutory prescriptions, and the same degree of discretion as the imposition by the DTI Secretary of a safeguard measure. The position of the respondents is one of "uncritical literalism" incongruent with the animus of the law. Moreover, a fundamentalist approach to Section 29 is not warranted, considering the absurdity of the consequences. Third. Interpretatio Talis In Ambiguis Semper Fienda Est, Ut Evitur Inconveniens Et Absurdum.
84 83

Even assuming arguendo that Section 29 has not expressly granted the CTA jurisdiction to review a negative ruling of the DTI Secretary, the Court is precluded from favoring an interpretation that would 85 cause inconvenience and absurdity. Adopting the respondents' position favoring the CTA's minimal jurisdiction would unnecessarily lead to illogical and onerous results. Indeed, it is illiberal to assume that Congress had intended to provide appellate relief to rulings imposing a safeguard measure but not to those declining to impose the measure. Respondents might argue that the right to relief from a negative ruling is not lost since the applicant could, as Philcemcor did, question such ruling through a special civil action for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, in lieu of an appeal to the CTA. Yet these two reliefs are of differing natures and gravamen. While an appeal may be predicated on errors of fact or errors of law, a special civil action for certiorari is grounded on grave abuse of discretion or lack of or excess of jurisdiction on the part of the decider. For a special civil action for certiorari to succeed, it is not enough that the questioned act of the respondent is wrong. As the Court clarified in Sempio v. Court of Appeals: A tribunal, board or officer acts without jurisdiction if it/he does not have the legal power to determine the case. There is excess of jurisdiction where, being clothed with the power to determine the case, the tribunal, board or officer oversteps its/his authority as determined by law. And there is grave abuse of discretion where the tribunal, board or officer acts in a capricious, whimsical, arbitrary or despotic manner in the exercise of his judgment as to be said to be equivalent to lack of jurisdiction. Certiorari is often resorted to in order to correct errors of jurisdiction. Where the error is one of law or of fact, which is a mistake of judgment, appeal is the 86 remedy. It is very conceivable that the DTI Secretary, after deliberate thought and careful evaluation of the evidence, may either make a negative preliminary determination as he is so empowered under Section 7 of the SMA, or refuse to adopt the definitive safeguard measure under Section 13 of the same law. Adopting the respondents' theory, this negative ruling is susceptible to reversal only through a special civil action for certiorari, thus depriving the affected party the chance to elevate the ruling on appeal on the rudimentary grounds of errors in fact or in law. Instead, and despite whatever indications that the DTI Secretary acted with measure and within the bounds of his jurisdiction are, the aggrieved party will be forced to resort to a gymnastic exercise, contorting the straight and narrow in an effort to discombobulate the courts into believing that what was within was actually beyond and what was studied and deliberate actually whimsical and capricious. What then would be the remedy of the party aggrieved by a negative ruling that simply erred in interpreting the facts or the law? It certainly cannot be the special civil action for certiorari, for as the Court held in Silverio v. Court of Appeals:"Certiorari is a remedy narrow in its scope 87 and inflexible in its character. It is not a general utility tool in the legal workshop." Fortunately, this theoretical quandary need not come to pass. Section 29 of the SMA is worded in such a way that it places under the CTA's judicial review all rulings of the DTI Secretary, which are connected

with the imposition of a safeguard measure. This is sound and proper in light of the specialized jurisdiction of the CTA over tax matters. In the same way that a question of whether to tax or not to tax is properly a tax matter, so is the question of whether to impose or not to impose a definitive safeguard measure. On another note, the second paragraph of Section 29 similarly reveals the legislative intent that rulings of the DTI Secretary over safeguard measures should first be reviewed by the CTA and not the Court of Appeals. It reads: The petition for review shall comply with the same requirements and shall follow the same rules of procedure and shall be subject to the same disposition as in appeals in connection with adverse rulings on tax matters to the Court of Appeals. This is the only passage in the SMA in which the Court of Appeals is mentioned. The express wish of Congress is that the petition conform to the requirements and procedure under Rule 43 of the Rules of Civil Procedure. Since Congress mandated that the form and procedure adopted be analogous to a review of a CTA ruling by the Court of Appeals, the legislative contemplation could not have been that the appeal be directly taken to the Court of Appeals. Issue of Binding Effect of Tariff Commission's Factual Determination on DTI Secretary. The next issue for resolution is whether the factual determination made by the Tariff Commission under the SMA is binding on the DTI Secretary. Otherwise stated, the question is whether the DTI Secretary may impose general safeguard measures in the absence of a positive final determination by the Tariff Commission. The Court of Appeals relied upon Section 13 of the SMA in ruling that the findings of the Tariff Commission do not necessarily constitute a final decision. Section 13 details the procedure for the adoption of a safeguard measure, as well as the steps to be taken in case there is a negative final determination. The implication of the Court of Appeals' holding is that the DTI Secretary may adopt a definitive safeguard measure, notwithstanding a negative determination made by the Tariff Commission. Undoubtedly, Section 13 prescribes certain limitations and restrictions before general safeguard measures may be imposed. However, the most fundamental restriction on the DTI Secretary's power in that respect is contained in Section 5 of the SMAthat there should first be a positive final determination of the Tariff Commission which the Court of Appeals curiously all but ignored. Section 5 reads: Sec. 5. Conditions for the Application of General Safeguard Measures. The Secretary shall apply a general safeguard measure upon a positive final determination of the [Tariff] Commission that a product is being imported into the country in increased quantities, whether absolute or relative to the domestic production, as to be a substantial cause of serious injury or threat thereof to the domestic industry; however, in the case of non-agricultural products, the Secretary shall first establish that the application of such safeguard measures will be in the public interest. (emphasis supplied) The plain meaning of Section 5 shows that it is the Tariff Commission that has the power to make a "positive final determination." This power lodged in the Tariff Commission, must be distinguished from the 88 power to impose the general safeguard measure which is properly vested on the DTI Secretary. All in all, there are two condition precedents that must be satisfied before the DTI Secretary may impose a general safeguard measure on grey Portland cement. First, there must be a positive final determination

by the Tariff Commission that a product is being imported into the country in increased quantities (whether absolute or relative to domestic production), as to be a substantial cause of serious injury or threat to the domestic industry. Second, in the case of non-agricultural products the Secretary must 89 establish that the application of such safeguard measures is in the public interest. As Southern Cross argues, Section 5 is quite clear-cut, and it is impossible to finagle a different conclusion even through overarching methods of statutory construction. There is no safer nor better settled canon of interpretation 90 that when language is clear and unambiguous it must be held to mean what it plainly expresses: In the quotable words of an illustrious member of this Court, thus: [I]f a statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. The verba legis or plain meaning rule rests on the valid presumption that the words employed by the legislature in a statute correctly express its intent or will and preclude the court from construing it differently. The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by the use 91 of such words as are found in the statute. Moreover, Rule 5 of the Implementing Rules and Regulations of the SMA, which interprets Section 5 of the law, likewise requires a positive final determination on the part of the Tariff Commission before the application of the general safeguard measure. The SMA establishes a distinct allocation of functions between the Tariff Commission and the DTI Secretary. The plain meaning of Section 5 shows that it is the Tariff Commission that has the power to make a "positive final determination." This power, which belongs to the Tariff Commission, must be distinguished from the power to impose general safeguard measure properly vested on the DTI Secretary. The distinction is vital, as a "positive final determination" clearly antecedes, as a condition precedent, the imposition of a general safeguard measure. At the same time, a positive final determination does not necessarily result in the imposition of a general safeguard measure. Under Section 5, notwithstanding the positive final determination of the Tariff Commission, the DTI Secretary is tasked to decide whether or not that the application of the safeguard measures is in the public interest. It is also clear from Section 5 of the SMA that the positive final determination to be undertaken by the Tariff Commission does not entail a mere gathering of statistical data. In order to arrive at such determination, it has to establish causal linkages from the statistics that it compiles and evaluates: after finding there is an importation in increased quantities of the product in question, that such importation is a substantial cause of serious threat or injury to the domestic industry. The Court of Appeals relies heavily on the legislative record of a congressional debate during deliberations on the SMA to assert a purported legislative intent that the findings of the Tariff Commission 93 do not bind the DTI Secretary. Yet as explained earlier, the plain meaning of Section 5 emphasizes that only if the Tariff Commission renders a positive determination could the DTI Secretary impose a safeguard measure. Resort to the congressional records to ascertain legislative intent is not warranted if a statute is clear, plain and free from ambiguity. The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by the use of such words as are 94 found in the statute. Indeed, the legislative record, if at all to be availed of, should be approached with extreme caution, as legislative debates and proceedings are powerless to vary the terms of the statute when the meaning is 95 96 clear. Our holding in Civil Liberties Union v. Executive Secretary on the resort to deliberations of the constitutional convention to interpret the Constitution is likewise appropriate in ascertaining statutory intent: While it is permissible in this jurisdiction to consult the debates and proceedings of the constitutional convention in order to arrive at the reason and purpose of the resulting Constitution, resort thereto may be had only when other guides fail as said proceedings are powerless to vary
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the terms of the Constitution when the meaning is clear. Debates in the constitutional convention "are of value as showing the views of the individual members, and as indicating the reasons for their votes, but they give us no light as to the views of the large majority who did not talk xxx. We 97 think it safer to construe the constitution from what appears upon its face." Moreover, it is easy to selectively cite passages, sometimes out of their proper context, in order to assert a misleading interpretation. The effect can be dangerous. Minority or solitary views, anecdotal ruminations, or even the occasional crude witticisms, may improperly acquire the mantle of legislative intent by the sole virtue of their publication in the authoritative congressional record. Hence, resort to legislative deliberations is allowable when the statute is crafted in such a manner as to leave room for doubt on the real intent of the legislature. Section 5 plainly evinces legislative intent to restrict the DTI Secretary's power to impose a general safeguard measure by preconditioning such imposition on a positive determination by the Tariff Commission. Such legislative intent should be given full force and effect, as the executive power to impose definitive safeguard measures is but a delegated powerthe power of taxation, by nature and by 98 command of the fundamental law, being a preserve of the legislature. Section 28(2), Article VI of the 1987 Constitution confirms the delegation of legislative power, yet ensures that the prerogative of Congress to impose limitations and restrictions on the executive exercise of this power: The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development 99 program of the Government. The safeguard measures which the DTI Secretary may impose under the SMA may take the following variations, to wit: (a) an increase in, or imposition of any duty on the imported product; (b) a decrease in or the imposition of a tariff-rate quota on the product; (c) a modification or imposition of any quantitative restriction on the importation of the product into the Philippines; (d) one or more appropriate adjustment measures, including the provision of trade adjustment assistance; and (e) any combination of the abovedescribed actions. Except for the provision of trade adjustment assistance, the measures enumerated by the SMA are essentially imposts, which precisely are the subject of delegation under Section 28(2), 100 Article VI of the 1987 Constitution. This delegation of the taxation power by the legislative to the executive is authorized by the Constitution 101 itself. At the same time, the Constitution also grants the delegating authority (Congress) the right to 102 impose restrictions and limitations on the taxation power delegated to the President. The restrictions and limitations imposed by Congress take on the mantle of a constitutional command, which the executive branch is obliged to observe. The SMA empowered the DTI Secretary, as alter ego of the President, to impose definitive general safeguard measures, which basically are tariff imposts of the type spoken of in the Constitution. However, the law did not grant him full, uninhibited discretion to impose such measures. The DTI Secretary authority is derived from the SMA; it does not flow from any inherent executive power. Thus, the 104 limitations imposed by Section 5 are absolute, warranted as they are by a constitutional fiat. Philcemcor cites our 1912 ruling in Lamb v. Phipps to assert that the DTI Secretary, having the final decision on the safeguard measure, has the power to evaluate the findings of the Tariff Commission and make an independent judgment thereon. Given the constitutional and statutory limitations governing the present case, the citation is misplaced. Lamb pertained to the discretion of the Insular Auditor of the Philippine Islands, whom, as the Court recognized, "[t]he statutes of the United States require[d] xxx to exercise his judgment upon the legality xxx [of] provisions of law and resolutions of Congress providing 106 for the payment of money, the means of procuring testimony upon which he may act."
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Thus in Lamb, while the Court recognized the wide latitude of discretion that may have been vested on the Insular Auditor, it also recognized that such latitude flowed from, and is consequently limited by, statutory grant. However, in this case, the provision of the Constitution in point expressly recognizes the authority of Congress to prescribe limitations in the case of tariffs, export/import quotas and other such safeguard measures. Thus, the broad discretion granted to the Insular Auditor of the Philippine Islands cannot be analogous to the discretion of the DTI Secretary which is circumscribed by Section 5 of the SMA. For that matter, Cario v. Commissioner on Human Rights, likewise cited by Philcemcor, is also inapplicable owing to the different statutory regimes prevailing over that case and the present petition. InCario, the Court ruled that the constitutional power of the Commission on Human Rights (CHR) to 108 investigate human rights' violations did not extend to adjudicating claims on the merits. Philcemcor claims that the functions of the Tariff Commission being "only investigatory," it could neither decide nor 109 adjudicate. The applicable law governing the issue in Cario is Section 18, Article XIII of the Constitution, which delineates the powers and functions of the CHR. The provision does not vest on the CHR the power to 110 adjudicate cases, but only to investigate all forms of human rights violations. Yet, without modifying the thorough disquisition of the Court in Cario on the general limitations on the investigatory power, the precedent is inapplicable because of the difference in the involved statutory frameworks. The Constitution 111 does not repose binding effect on the results of the CHR's investigation. On the other hand, through Section 5 of the SMA and under the authority of Section 28(2), Article VI of the Constitution, Congress did 112 intend to bind the DTI Secretary to the determination made by the Tariff Commission. It is of no consequence that such determination results from the exercise of investigatory powers by the Tariff Commission since Congress is well within its constitutional mandate to limit the authority of the DTI Secretary to impose safeguard measures in the manner that it sees fit. The Court of Appeals and Philcemcor also rely on Section 13 of the SMA and Rule 13 of the SMA's Implementing Rules in support of the view that the DTI Secretary may decide independently of the determination made by the Tariff Commission. Admittedly, there are certain infelicities in the language of Section 13 and Rule 13. But reliance should not be placed on the textual imprecisions. Rather, Section 13 113 and Rule 13 must be viewed in light of the fundamental prescription imposed by Section 5. Section 13 of the SMA lays down the procedure to be followed after the Tariff Commission renders its report. The provision reads in full: SEC. 13. Adoption of Definitive Measures. Upon its positive determination, the Commission shall recommend to the Secretary an appropriate definitive measure, in the form of: (a) An increase in, or imposition of, any duty on the imported product; (b) A decrease in or the imposition of a tariff-rate quota (MAV) on the product; (c) A modification or imposition of any quantitative restriction on the importation of the product into the Philippines; (d) One or more appropriate adjustment measures, including the provision of trade adjustment assistance; (e) Any combination of actions described in subparagraphs (a) to (d). The Commission may also recommend other actions, including the initiation of international negotiations to address the underlying cause of the increase of imports of the product, to alleviate
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the injury or threat thereof to the domestic industry, and to facilitate positive adjustment to import competition. The general safeguard measure shall be limited to the extent of redressing or preventing the injury and to facilitate adjustment by the domestic industry from the adverse effects directly attributed to the increased imports: Provided, however, That when quantitative import restrictions are used, such measures shall not reduce the quantity of imports below the average imports for the three (3) preceding representative years, unless clear justification is given that a different level is necessary to prevent or remedy a serious injury. A general safeguard measure shall not be applied to a product originating from a developing country if its share of total imports of the product is less than three percent (3%): Provided, however, That developing countries with less than three percent (3%) share collectively account for not more than nine percent (9%) of the total imports. The decision imposing a general safeguard measure, the duration of which is more than one (1) year, shall be reviewed at regular intervals for purposes of liberalizing or reducing its intensity. The industry benefiting from the application of a general safeguard measure shall be required to show positive adjustment within the allowable period. A general safeguard measure shall be terminated where the benefiting industry fails to show any improvement, as may be determined by the Secretary. The Secretary shall issue a written instruction to the heads of the concerned government agencies to implement the appropriate general safeguard measure as determined by the Secretary within fifteen (15) days from receipt of the report. In the event of a negative final determination, or if the cash bond is in excess of the definitive safeguard duty assessed, the Secretary shall immediately issue, through the Secretary of Finance, a written instruction to the Commissioner of Customs, authorizing the return of the cash bond or the remainder thereof, as the case may be, previously collected as provisional general safeguard measure within ten (10) days from the date a final decision has been made: Provided, That the government shall not be liable for any interest on the amount to be returned. The Secretary shall not accept for consideration another petition from the same industry, with respect to the same imports of the product under consideration within one (1) year after the date of rendering such a decision. When the definitive safeguard measure is in the form of a tariff increase, such increase shall not be subject or limited to the maximum levels of tariff as set forth in Section 401(a) of the Tariff and Customs Code of the Philippines. To better comprehend Section 13, note must be taken of the distinction between the investigatory and recommendatory functions of the Tariff Commission under the SMA. The word "determination," as used in the SMA, pertains to the factual findings on whether there are increased imports into the country of the product under consideration, and on whether such increased imports are a substantial cause of serious injury or threaten to substantially cause serious injury to the 114 domestic industry. The SMA explicitly authorizes the DTI Secretary to make a preliminary 115 116 determination, and the Tariff Commission to make the final determination. The distinction is fundamental, as these functions are not interchangeable. The Tariff Commission makes its determination only after a formal investigation process, with such investigation initiated only if there is a positive 117 preliminary determination by the DTI Secretary under Section 7 of the SMA. On the other hand, the DTI Secretary may impose definitive safeguard measure only if there is a positive final determination made by 118 the Tariff Commission.

In contrast, a "recommendation" is a suggested remedial measure submitted by the Tariff Commission under Section 13 after making a positive final determination in accordance with Section 5. The Tariff Commission is not empowered to make a recommendation absent a positive final determination on its 119 part. Under Section 13, the Tariff Commission is required to recommend to the [DTI] Secretary an 120 "appropriate definitive measure." The Tariff Commission "may also recommend other actions, including the initiation of international negotiations to address the underlying cause of the increase of imports of the products, to alleviate the injury or threat thereof to the domestic industry and to facilitate positive 121 adjustment to import competition." The recommendations of the Tariff Commission, as rendered under Section 13, are not obligatory on the DTI Secretary. Nothing in the SMA mandates the DTI Secretary to adopt the recommendations made by the Tariff Commission. In fact, the SMA requires that the DTI Secretary establish that the application of such safeguard measures is in the public interest, notwithstanding the Tariff Commission's 122 recommendation on the appropriate safeguard measure based on its positive final determination. The non-binding force of the Tariff Commission's recommendations is congruent with the command of Section 28(2), Article VI of the 1987 Constitution that only the President may be empowered by the Congress to 123 impose appropriate tariff rates, import/export quotas and other similar measures. It is the DTI Secretary, as alter ego of the President, who under the SMA may impose such safeguard measures subject to the limitations imposed therein. A contrary conclusion would in essence unduly arrogate to the Tariff Commission the executive power to impose the appropriate tariff measures. That is why the SMA empowers the DTI Secretary to adopt safeguard measures other than those recommended by the Tariff Commission. Unlike the recommendations of the Tariff Commission, its determination has a different effect on the DTI Secretary. Only on the basis of a positive final determination made by the Tariff Commission under Section 5 can the DTI Secretary impose a general safeguard measure. Clearly, then the DTI Secretary is bound by thedetermination made by the Tariff Commission. Some confusion may arise because the sixth paragraph of Section 13 uses the variant word "determined" in a different context, as it contemplates "the appropriate general safeguard measure as determined by the Secretary within fifteen (15) days from receipt of the report." Quite plainly, the word "determined" in this context pertains to the DTI Secretary's power of choice of the appropriate safeguard measure, as opposed to the Tariff Commission's power to determine the existence of conditions necessary for the imposition of any safeguard measure. In relation to Section 5, such choice also relates to the mandate of the DTI Secretary to establish that the application of safeguard measures is in the public interest, also within the fifteen (15) day period. Nothing in Section 13 contradicts the instruction in Section 5 that the DTI Secretary is allowed to impose the general safeguard measures only if there is a positive determination made by the Tariff Commission. Unfortunately, Rule 13.2 of the Implementing Rules of the SMA is captioned "Final Determination by the Secretary." The assailed Decision and Philcemcor latch on this phraseology to imply that the factual determination rendered by the Tariff Commission under Section 5 may be amended or reversed by the DTI Secretary. Of course, implementing rules should conform, not clash, with the law that they seek to implement, for a regulation which operates to create a rule out of harmony with the statute is a 125 nullity. Yet imperfect draftsmanship aside, nothing in Rule 13.2 implies that the DTI Secretary can set aside the determination made by the Tariff Commission under the aegis of Section 5. This can be seen by examining the specific provisions of Rule 13.2, thus: RULE 13.2. Final Determination by the Secretary RULE 13.2.a. Within fifteen (15) calendar days from receipt of the Report of the Commission, the Secretary shall make a decision, taking into consideration the measures recommended by the Commission.
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RULE 13.2.b. If the determination is affirmative, the Secretary shall issue, within two (2) calendar days after making his decision, a written instruction to the heads of the concerned government agencies to immediately implement the appropriate general safeguard measure as determined by him. Provided, however, that in the case of nonagricultural products, the Secretary shall first establish that the imposition of the safeguard measure will be in the public interest. RULE 13.2.c. Within two (2) calendar days after making his decision, the Secretary shall also order its publication in two (2) newspapers of general circulation. He shall also furnish a copy of his Order to the petitioner and other interested parties, whether affirmative or negative. (Emphasis supplied.) Moreover, the DTI Secretary does not have the power to review the findings of the Tariff Commission for it is not subordinate to the Department of Trade and Industry ("DTI"). It falls under the supervision, not of 126 the DTI nor of the Department of Finance (as mistakenly asserted by Southern Cross), but of the National Economic Development Authority, an independent planning agency of the 127 government of co-equal rank as the DTI. As the supervision and control of a Department Secretary 128 is limited to the bureaus, offices, and agencies under him, the DTI Secretary generally cannot exercise review authority over actions of the Tariff Commission. Neither does the SMA specifically authorize the DTI Secretary to alter, amend or modify in any way the determination made by the Tariff Commission. The most that the DTI Secretary could do to express displeasure over the Tariff Commission's actions is to ignore its recommendation, but not its determination. The word "determination" as used in Rule 13.2 of the Implementing Rules is dissonant with the same word as employed in the SMA, which in the latter case is undeviatingly in reference to the determination made by the Tariff Commission. Beyond the resulting confusion, however, the divergent use in Rule 13.2 is explicable as the Rule textually pertains to the power of the DTI Secretary to review the recommendations of the Tariff Commission, not the latter's determination. Indeed, an examination of the specific provisions show that there is no real conflict to reconcile. Rule 13.2 respects the logical order imposed by the SMA. The Rule does not remove the essential requirement under Section 5 that a positive final determination be made by the Tariff Commission before a definitive safeguard measure may be imposed by the DTI Secretary. The assailed Decision characterizes the findings of the Tariff Commission as merely recommendatory 129 and points to the DTI Secretary as the authority who renders the final decision. At the same time, Philcemcor asserts that the Tariff Commission's functions are merely investigatory, and as such do not include the power to decide or adjudicate. These contentions, viewed in the context of the fundamental requisite set forth by Section 5, are untenable. They run counter to the statutory prescription that a positive final determination made by the Tariff Commission should first be obtained before the definitive safeguard measures may be laid down. Was it anomalous for Congress to have provided for a system whereby the Tariff Commission may preclude the DTI, an office of higher rank, from imposing a safeguard measure? Of course, this Court does not inquire into the wisdom of the legislature but only charts the boundaries of powers and functions set in its enactments. But then, it is not difficult to see the internal logic of this statutory framework. For one, as earlier stated, the DTI cannot exercise review powers over the Tariff Commission which is not its subordinate office. Moreover, the mechanism established by Congress establishes a measure of check and balance involving two different governmental agencies with disparate specializations. The matter of safeguard measures is of such national importance that a decision either to impose or not to impose then could have ruinous effects on companies doing business in the Philippines. Thus, it is ideal to put in place a

system which affords all due deliberation and calls to fore various governmental agencies exercising their particular specializations. Finally, if this arrangement drawn up by Congress makes it difficult to obtain a general safeguard measure, it is because such safeguard measure is the exception, rather than the rule. The Philippines is obliged to observe its obligations under the GATT, under whose framework trade liberalization, not protectionism, is laid down. Verily, the GATT actually prescribes conditions before a member-country may impose a safeguard measure. The pertinent portion of the GATT Agreement on Safeguards reads: 2. A Member may only apply a safeguard measure to a product only if that member has determined, pursuant to the provisions set out below, that such product is being imported into its territory in such increased quantities, absolute or relative to domestic production, and under such conditions as to cause or threaten to cause serious injury to the domestic industry that produces 130 like or directly competitive products. 3. (a) A Member may apply a safeguard measure only following an investigation by the competent authorities of that Member pursuant to procedures previously established and made public in consonance with Article X of the GATT 1994. This investigation shall include reasonable public notice to all interested parties and public hearings or other appropriate means in which importers, exporters and other interested parties could present evidence and their views, including the opportunity to respond to the presentations of other parties and to submit their views, inter alia, as to whether or not the application of a safeguard measure would be in the public interest. The competent authorities shall publish a report setting forth their findings and 131 reasoned conclusions reached on all pertinent issues of fact and law. The SMA was designed not to contradict the GATT, but to complement it. The two requisites laid down in Section 5 for a positive final determination are the same conditions provided under the GATT Agreement on Safeguards for the application of safeguard measures by a member country. Moreover, the investigatory procedure laid down by the SMA conforms to the procedure required by the GATT Agreement on Safeguards. Congress has chosen the Tariff Commission as the competent authority to conduct such investigation. Southern Cross stresses that applying the provision of the GATT Agreement 132 on Safeguards, the Tariff Commission is clearly empowered to arrive at binding conclusions. We agree: binding on the DTI Secretary is the Tariff Commission's determinations on whether a product is imported in increased quantities, absolute or relative to domestic production and whether any such increase is a 133 substantial cause of serious injury or threat thereof to the domestic industry. Satisfied as we are with the proper statutory paradigm within which the SMA should be analyzed, the flaws in the reasoning of the Court of Appeals and in the arguments of the respondents become apparent. To better understand the dynamics of the procedure set up by the law leading to the imposition of definitive safeguard measures, a brief step-by-step recount thereof is in order. 1. After the initiation of an action involving a general safeguard measure, the DTI Secretary makes a preliminary determination whether the increased imports of the product under consideration substantially 135 cause or threaten to substantially cause serious injury to the domestic industry, and whether the 136 imposition of a provisional measure is warranted under Section 8 of the SMA. If the preliminary determination is negative, it is implied that no further action will be taken on the application. 2. When his preliminary determination is positive, the Secretary immediately transmits the records 137 covering the application to the Tariff Commission for immediate formal investigation. 3. The Tariff Commission conducts its formal investigation, keyed towards making a final determination. In the process, it holds public hearings, providing interested parties the opportunity to present evidence or 138 otherwise be heard. To repeat, Section 5 enumerates what the Tariff Commission is tasked to determine: (a) whether a product is being imported into the country in increased quantities, irrespective of
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whether the product is absolute or relative to the domestic production; and (b) whether the importation in 139 increased quantities is such that it causes serious injury or threat to the domestic industry. The findings of the Tariff Commission as to these matters constitute the final determination, which may be either positive or negative. 4. Under Section 13 of the SMA, if the Tariff Commission makes a positive determination, the Tariff Commission "recommends to the [DTI] Secretary an appropriate definitive measure." The Tariff Commission "may also recommend other actions, including the initiation of international negotiations to address the underlying cause of the increase of imports of the products, to alleviate the injury or threat 140 thereof to the domestic industry, and to facilitate positive adjustment to import competition." 5. If the Tariff Commission makes a positive final determination, the DTI Secretary is then to decide, within fifteen (15) days from receipt of the report, as to what appropriate safeguard measures should he impose. 6. However, if the Tariff Commission makes a negative final determination, the DTI Secretary cannot impose any definitive safeguard measure. Under Section 13, he is instructed instead to return whatever cash bond was paid by the applicant upon the initiation of the action for safeguard measure. The Effect of the Court's Decision The Court of Appeals erred in remanding the case back to the DTI Secretary, with the instruction that the DTI Secretary may impose a general safeguard measure even if there is no positive final determination from the Tariff Commission. More crucially, the Court of Appeals could not have acquired jurisdiction over Philcemcor's petition for certiorari in the first place, as Section 29 of the SMA properly vests jurisdiction on the CTA. Consequently, the assailed Decision is an absolute nullity, and we declare it as such. What is the effect of the nullity of the assailed Decision on the 5 June 2003 Decision of the DTI Secretary imposing the general safeguard measure? We have recognized that any initial judicial review of a DTI ruling in connection with the imposition of a safeguard measure belongs to the CTA. At the same time, the Court also recognizes the fundamental principle that a null and void judgment cannot produce any legal effect. There is sufficient cause to establish that the 5 June 2003 Decision of the DTI Secretary resulted from the assailed Court of Appeals Decision, even if the latter had not yet become final. Conversely, it can be concluded that it was because of the putative imprimatur of the Court of Appeals' Decision that the DTI Secretary issued his ruling imposing the safeguard measure. Since the 5 June 2003 Decision derives its legal effect from the voidDecision of the Court of Appeals, this ruling of the DTI Secretary is consequently void. The spring cannot rise higher than the source. The DTI Secretary himself acknowledged that he drew stimulating force from the appellate court's Decision for in his own 5 June 2003 Decision, he declared: From the aforementioned ruling, the CA has remanded the case to the DTI Secretary for a final 141 decision. Thus, there is no legal impediment for the Secretary to decide on the application. The inescapable conclusion is that the DTI Secretary needed the assailed Decision of the Court of Appeals to justify his rendering a second Decision. He explicitly invoked the Court of Appeals' Decision as basis for rendering his 5 June 2003 ruling, and implicitly recognized that without such Decision he would not have the authority to revoke his previous ruling and render a new, obverse ruling. It is clear then that the 25 June 2003 Decision of the DTI Secretary is a product of the void Decision, it being an attempt to carry out such null judgment. There is therefore no choice but to declare it void as well, lest we sanction the perverse existence of a fruit from a non-existent tree. It does not even matter what the disposition of the 25 June 2003 Decision was, its nullity would be warranted even if the DTI Secretary chose to uphold his earlier ruling denying the application for safeguard measures.

It is also an unfortunate spectacle to behold the DTI Secretary, seeking to enforce a judicial decision which is not yet final and actually pending review on appeal. Had it been a judge who attempted to enforce a decision that is not yet final and executory, he or she would have readily been subjected to sanction by this Court. The DTI Secretary may be beyond the ambit of administrative review by this Court, but we are capacitated to allocate the boundaries set by the law of the land and to exact fealty to the legal order, especially from the instrumentalities and officials of government. WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals is DECLARED NULL AND VOID and SET ASIDE. The Decision of the DTI Secretary dated 25 June 2003 is also DECLARED NULL AND VOID and SET ASIDE. No Costs. SO ORDERED. Puno, (Chairman), Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 94262 May 31, 1991 FEEDER INTERNATIONAL LINE, PTE., LTD., by its agent, FEEDER INTERNATIONAL (PHILS.) INC., petitioner, vs. COURT OF APPEALS, Fourteenth Division, COURT OF TAX APPEALS, and COMMISSIONER OF CUSTOMS,respondents. Emma Quisumbing-Fernando and Yolanda Quisumbing-Javellana & Associates for petitioner.

REGALADO, J.:p The instant petition seeks the reversal of the decision of respondent Court of Appeals dated May 8, 1990, affirming the decision rendered by respondent Court of Tax Appeals which found the vessel M/T "ULU WAI" liable under Section 2530(a) of the Tariff and Customs Code of the Philippines (Presidential Decree No. 1464), as amended, and its cargo of 1,100 metric tons of gas oil and 1,000 metric tons of fuel oil liable under Section 2530(a), (f), and (1-1) of the same Code and ordering the forfeiture of the said 1 vessel and its cargo. The facts as culled from the decision of the Court of Appeals in CA-G.R. SP No. 20470 are as follows: The M/T "ULU WAI" foreign vessel of Honduran registry, owned and operated by Feeder International Shipping Lines of Singapore, left Singapore on May 6, 1986 carrying 1,100

metric tons of gas oil and 1,000 metric tons of fuel oil consigned to Far East Synergy Corporation of Zamboanga, Philippines. On May 14, 1986, the vessel anchored at the vicinity of Guiuanon Island in Iloilo without notifying the Iloilo customs authorities. The presence of the vessel only came to the knowledge of the Iloilo authorities by information of the civilian informer in the area. Acting on said information, the Acting District Collector of Iloilo dispatched a Customs team on May 19, 1986 to verify the report. The Customs team found out that the vessel did not have on board the required ship and shipping documents, except for a clearance from the port authorities of Singapore clearing the vessel for "Zamboanga." In view thereof, the vessel and its cargo were held and a Warrant of Seizure and Detention over the same was issued after due investigation. The petitioner then filed its Motion to Dismiss and to Quash the Warrants of Seizure and Detention which the District Collector denied in his Order dated December 12, 1986. In the course of the forfeiture proceedings, the parties, through their respective counsel, agreed on a stipulation of facts, to wit: l. That the existence and identity of MT "ULU WAI" subject of Sl-2-86, herein identified as Exh. "A", is admitted. 2. That the existence and identity of l,100 metric tons of gas oil, subject of Sl-2-86-A, herein identified as Exh. "B", is admitted; 3. That the existence and identity of 1,000 metric tons of fuel oil, subject of Sl-2-86 herein identified as Exh. "B-1", is admitted; 4. That M/T "ULU WAI" left Singapore May 6, 1986 and was cleared by Singapore customs authorities for Zamboanga, Philippines; 5. That subject vessel arrived at Guiuanon Island, Municipality of Nueva Valencia, sub-province of Guimaras, Province of Iloilo, Philippines, about 1120HRS, May 14,1986; 6. That subject vessel was boarded by Customs and Immigration authorities for the first time in the afternoon of May 19, 1986, at about 1600HRS; 7. That an apprehension report dated May 21, 1986, submitted by the Team leader of the Customs and Immigration Team, Roberto Intrepido, marked and identified as Exh. "C", is admitted; 8. That at the time of boarding, the Master of subject vessel could not produce any ship and/or shipping documents regarding her cargo except the Port Clearance Certificate No. 179999 issued by the Port of Singapore authority dated May 4, 1986, marked as Exh. "D", which is hereby admitted;

9. That on May 26, 1986, the Master of M/T "ULU WAI", Capt. Romeo E. Deposa filed a Marine Protest dated same date, which Marine Protest, marked and identified as Exh. "E", is hereby admitted; 10. That the sworn statement of said Capt. Romeo E. Deposa, marked and identified as Exh. "F", given on May 26, 1986 before Atty. Hernando Hinojales, Customs Legal Officer, is admitted; 11. That the sworn statement of Mr. Antonio Torres, Owner's representative of M/T "ULU WAI" marked and identified as Exh. "G" given before Atty. Hernando Hinojales on May 28,1986, is admitted; 12. That the sworn statement of Wilfredo Lumagpas, Master of M/T "CATHEAD" given before Lt. Dennis Azarraga on June 4, 1986, marked and identified as Exh. "H", is admitted; 13. That the existence of Fixture Note No. FN-M-86-05-41 entered into by and between the National Stevedoring & Lighterage Corporation and the Far East Synergy Corporation, marked and identified as Exh. "I", is admitted; and; 14. That the Preliminary Report of Survey Sounding Report dated June 17, 1986, signed by J.P. Piad, Surveyor of Interport Surveying Services, Inc. and duly attested by Ernesto Cutay, Chief Officer of the M/T "ULU 2 WAI" marked and identified as Exh. "J", is also admitted. On March 17, 1987, the District Collector issued his decision, with the following disposition: WHEREFORE, premises considered, the M/T "ULU WAI" hereby found guilty of violating Section 2530 (a) of the Tariff and Customs Code of the Philippines (PD 1464), as amended, while her cargo of 1,100 M/T Gas Oil and 1,000 M/T Fuel Oil are hereby found guilty of violating Section 2530* (a), (f), and (1-1) under the same Code and are hereby forfeited in favor of the Republic of the Philippines. SO ORDERED.
3

Petitioner appealed to the Commissioner of Customs who rendered a decision dated May 13, 1987, the decretal portion of which reads: WHEREFORE, premises considered, the decision dated March 19, 1987 of the District Collector of Customs of Iloilo, ordering the forfeiture of M/T "ULU WAI" and its cargo of 2,100 metric tons of gas and fuel oil is hereby affirmed in toto. SO ORDERED.
4

On June 25, 1987, petitioner filed a petition for review of the decisions of the Collector and the Commissioner of Customs with the Court of Tax Appeals, praying for the issuance of a writ of preliminary injunction and/or a restraining order to enjoin the Commissioner from implementing his decision. On December 14, 1988, the Court of Tax Appeals issued its decision, with this dispositive portion: WHEREFORE, the decision of respondent Commissioner of Customs dated May 13, 1987, ordering the forfeiture of the vessel M/T "ULU WAI" for violation of Section 2530(a) of the Tariff and Custom Codes (sic), as amended, and its cargo of 1,100 metric tons of

Gas Oil and 1,000 metric tons of Fuel Oil for violation of Section 2530 * (a) and (f), and (I1) of the same Code, is hereby affirmed. With costs. SO ORDERED.
5

Petitioner, on January 19, 1990, filed a petition for review of the Court of Tax Appeals' decision with this 6 Court. On March 21, 1990, we issued a resolution referring the disposition of the case to the Court of Appeals in view of our decision in Development Bank of the Philippines vs. Court of Appeals, et 7 al. holding that final judgments or decrees of the Court of Tax Appeals are within the exclusive appellate jurisdiction of the Court of Appeals. On May 8, 1990, the Court of Appeals rendered its questioned decision affirming the decision of the Court of Tax Appeals. Petitioner's motion for reconsideration having been denied on July 4, 1990, it interposed this instant petition contending that: 1. The Court of Appeals erred in finding on the basis of circumstantial evidence that an illegal importation had been committed; 2. Petitioner was deprived of property without due process of law in that its right to be presumed innocent was not recognized and the decision was not supported by proof beyond reasonable doubt; and 3. The sworn statements of Deposa and Torres were taken without assistance of counsel in violation of 8 their constitutional right thereto. We find no merit in the Petition. 1. It must be here emphasized that a forfeiture proceeding under tariff and customs laws is not penal in nature, contrary to the argument advanced by herein petitioner. In the case of People vs. Court of first 9 Instance of Rizal etc., et al., this Court made an exhaustive analysis of the nature of forfeiture proceedings, in relation to criminal proceedings, as follows: . . . It is quite clear that seizure and forfeiture proceedings under the tariff and customs laws are not criminal in nature as they do not result in the conviction of the offender nor in the imposition of the penalty provided for in Section 3601 of the Code. As can be gleaned from Section 2533 of the code, seizure proceedings, such as those instituted in this case, are purely civil and administrative in character, the main purpose of which is to enforce the administrative fines or forfeiture incident to unlawful importation of goods or their deliberate possession. The penalty in seizure cases is distinct and separate from the criminal liability that might be imposed against the indicted importer or possessor and both kinds of penalties may be imposed. In the case at bar, the decision of the Collector of Customs, as in other seizure proceedings, concerns the res rather than the persona. The proceeding is a probe on contraband or illegally imported goods. These merchandise violated the revenue law of the country, and as such, have been prevented from being assimilated in lawful commerce until corresponding duties are paid thereon and the penalties imposed and satisfied either in the form of fine or of forfeiture in favor of the government who will dispose of them in accordance with law. The importer or possessor is treated differently. The fact that the administrative penalty be falls on him is an inconsequential incidence to criminal liability. By the same token, the probable guilt cannot be negated simply because he was not held administratively liable. The Collector's final declaration that the articles are not subject to forfeiture does not detract his findings that untaxed goods were transported in respondents' car and seized from their possession by agents of the law. Whether criminal liability lurks on the strength of the provision of the Tariff and Customs

Code adduced in the information can only be determined in a separate criminal action. Respondents' exoneration in the administrative cases cannot deprive the State of its right to prosecute. But under our penal laws, criminal responsibility, if any, must be proven not by preponderance of evidence but by proof beyond reasonable doubt. Considering, therefore, that proceedings for the forfeiture of goods illegally imported are not criminal in nature since they do not result in the conviction of the wrongdoer nor in the imposition upon him of a penalty, proof beyond reasonable doubt is not required in order to justify the forfeiture of the goods. In this case, the degree of proof required is merely substantial evidence which means such relevant evidence as 10 a reasonable mind might accept as adequate to support a conclusion. In the case at bar, we find and so hold that the Government has sufficiently established that an illegal importation, or at least an attempt thereof, has been committed with the use of the vessel M/T "ULU WAI," thus warranting the forfeiture of said vessel and its cargo pursuant to the provisions of the Tariff and Customs Code. Before we proceed to a discussion of the factual findings of the Court of Appeals, it bears mention that petitioner, which is a corporate entity, has no personality to invoke the right to be presumed innocent which right is available only to an individual who is an accused in a criminal case. 2. The main issue for resolution is whether or not there was an illegal importation committed, or at least an attempt thereof, which would justify a forfeiture of the subject vessel and its cargo. Petitioner avers that respondent court erred in finding that an illegal importation had been committed on the basis of circumstantial evidence, erroneously relying on Section 5 (now Section 4), Rule 133 of the Rules of Court. As earlier stated, forfeiture proceedings are not criminal in nature, hence said provision of Rule 133 which involves. such circumstantial evidence as will produce a conviction beyond reasonable doubt does not apply. Section 1202 of the Tariff and Customs Code provides that importation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with intention to unload therein. It is clear from the provision of the law that mere intent to unload is sufficient to commence an importation. And "intent," being a state of mind, is rarely susceptible of direct proof, but must ordinarily be inferred from the 11 facts, and therefore can only be proved by unguarded, expressions, conduct and circumstances 12 generally. In the case at bar, that petitioner is guilty of illegal importation, there having been an intent to unload, is amply supported by substantial evidence as clearly demonstrated by this comprehensive discussion in respondent court's decision: It is undisputed that the vessel M/T "ULU WAI" entered the jurisdiction of the Philippines. The issue that calls for Our resolution is whether or not there was an intention to unload. The facts and circumstances borne by the evidence convince Us that there was intent to unload. The following circumstances unmistakably point to this conclusion. 1. Considering that the vessel came from Singapore, the route to Zamboanga was shorter and Iloilo lies further north. It is not logical for the sailing vessel to travel a longer distance to get the necessary repairs. 2. When the vessel M/T "ULU WAI" anchored at Guiuanon Island, Guimaras, Iloilo, it did not notify the Iloilo port or Customs authorities of its arrival. The master of the vessel did not file a marine protest until 12 days after it had anchored, despite the supposed urgency of the repairs needed and notwithstanding the provision (Sec. 1016) of the Code requiring the master to file protest within 24 hours.

3. At the time of boarding by the customs personnel, the required ship's and shipping documents were not on board except the clearance from Singaporean port officials clearing the vessel for Zamboanga. Petitioner claims that these were turned over to the shipping agent who boarded the vessel on May 15, 1986. However, this claim is belied by the sworn marine protest (Exhibit "E") of the master of M/T "ULU WAI" Mr. Romeo Deposa. It was only on or about the 20th of May when I instructed one of the crew to: get down of (sic) the vessel and find means and ways to contact the vessel's representative. Moreover, in such Sworn Statement (Exhibit "G"), ship agent, Antonio Torres, stated that he did not know the buyer of the oil, which is impossible if he had the Local Purchase Order of the alleged buyer, Pogun Construction SDN. Torres also swore that his knowledge came from the vessel's owner, without mentioning the shipping documents which indicate such data. He also said that he did not know the consignee of the oil which would have been patent from the documents. Lastly, as also pointed out by the court a quo, the captain of the vessel M/T "ULU WAI" Romeo Deposa, in his sworn statement to custom authorities on May 26, 1986, enumerated the documents he allegedly gave to Mr. Antonio Torres, but did not mention as among them the Local Purchase Order of Pogun Construction SDN and the Bill of Lading. 4. When the vessel was inspected, the tugboat M/T "CATHEAD", and the large M/T "SEMIRANO NO. 819" were alongside it. A fixture note revealed that the barge and the tugboat were contracted by Consignee Far East Synergy to load the cargo of the vessel into the awaiting barge and to discharge the same to Manila (Exhibits "I" and "I-1"). It is of no moment that the fixture note did not expressly mention the vessel M/T "ULU WAI" Government witnesses, Asencio and Lumagpas, testified that it was the vessel's 13 cargo which was to be unloaded and brought to Manila by them. The aforequoted findings of fact of respondent Court of Appeals are in consonance with the findings of both the Collector and the Commissioner of Customs, as affirmed by the Court of Tax Appeals. We, therefore, find no compelling reason to deviate from the elementary principle that findings of fact of the Court of Appeals, and of the administrative and quasi-judicial bodies for that matter, are entitled to great weight and are conclusive and binding upon this Court absent a showing of a grave abuse of discretion amounting to lack of jurisdiction. 3. The fact that the testimonies of Deposa and Torres were given without the assistance of counsel may not be considered an outright violation of their constitutional right to be assisted by counsel. As explained 14 in the case of Nera vs. The Auditor General: The right to the assistance of counsel is not indispensable to due process unless required by the Constitution or a law. Exception is made in the charter only during the custodial investigation of a person suspected of a crime, who may not waive his right to counsel except in writing and in the presence of counsel, and during the trial of the accused, who has the right "to be heard by himself and counsel," either retained by him or provided for him by the government at its expense. These guarantees are embodied in the Constitution, along with the other rights of the person facing criminal prosecution, because of the odds he must contend with to defend his liberty (and before even his life) against the awesome authority of the State. In other proceedings, however, the need for the assistance of counsel is not as urgent nor is it deemed essential to their validity. There is nothing in the Constitution that says a

party in a non-criminal proceeding is entitled to be represented by counsel and that without such representation he will not be bound by such proceedings. The assistance of lawyers, while desirable, is not indispensable. The legal profession was not engrafted in the due process clause such that without the participation of its members the safeguard is deemed ignored or violated. The ordinary citizen is not that helpless that he cannot validly act at all except only with a lawyer at his side. Besides, if ever there was any doubt as to the veracity of the sworn statements of Deposa and Torres, they should have been presented during any appropriate stage of the proceedings to refute or deny the statements they made. This was not done by petitioner. Hence, the presumption that official duty was regularly performed stands. In addition, petitioner does not deny that Torres is himself a lawyer. Finally, petitioner simply contends that the sworn statements were taken without the assistance of counsel but, however, failed to allege or prove that the same were taken under anomalous circumstances which would render them inadmissible as evidence against petitioner. We thus find no compelling reason to doubt the validity or veracity of the said sworn statements. WHEREFORE, the instant petition is DENIED for lack of merit and the judgment appealed from is hereby AFFIRMED in toto. SO ORDERED. Melencio-Herrera, Paras and Padilla, JJ., concur. Sarmiento, J., is on leave.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 135253 December 9, 2004

COMMISSIONER OF CUSTOMS, petitioner, vs. MILWAUKEE INDUSTRIES CORPORATION, respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

Assailed in this petition for review on certiorari are the Decision dated July 8, 1998 and Resolution dated August 24, 1998 of the Court of Appeals in CA-G.R. SP No. 44496, affirming the Decision of the Court of Tax Appeals (CTA) in C.T.A. Case No. 5160. The CTA Decision reversed and set aside the Commissioner of Customs' Decision ordering the forfeiture of respondent's shipment of imported steel billets. Milwaukee Industries Corporation, respondent, is a domestic corporation engaged in the importation of steel billets, with principal office at No. 130 Amorsolo Street, Legaspi Village, Makati City. It has a warehouse/factory in Apalit, Pampanga where it manufactures and molds the street billets into finished products, such as plates, sheets, pipes, rods and bars for the local market. On November 5, 1993, the Far East Bank and Trust Company (FEBTC) issued to respondent a commercial letter of credit in the amount of US$2,071,000.00, in favor of Klockner & Co. of Germany for the importation of 11,985 pieces of secondary steel billets weighing 9,500 metric tons. At about the same time, respondent, through its customs broker, Schmitz Transport and Brokerage Corporaton (Schmitz), filed with the FEBTC an Import Entry Declaration and deposited the amount of P1,863,598.00 representing the advance deposit for customs duties and taxes due on the importation. The Bureau of 3 Customs then issued the corresponding Official Receipt No. 30277274 on the deposit. On February 1, 1994, the shipment of steel billets arrived at the port of Manila aboard the vessel "S/S SOLSYN." Forthwith, Jimmy Pastoriza, customs inspector, and Generoso Mirallo and Lucas Almendras, customs guards, who were tasked to supervise the unloading of the cargo, boarded the vessel. Jose Garcia, a supervisor of Schmitz, also boarded the vessel and presented to Inspector Pastoriza a Permit to Discharge Shipside (or "Shipside Permit"), he obtained from the Bureau of Customs, authorizing the discharge of the cargo from the vessel to the barges/lighters of Transport Venture, Inc. It took six days (from February 1 to 6, 1994) to discharge the cargo. Inspector Pastoriza then issued thirteen Boat Notes on the entire shipment authorizing its transfer, with the instruction that the same should be "under guard" by the Bureau of Customs, and that the "(g)uard remain in continuous duty until released by Customs Authorities or upon presentation of a Valid Delivery 4 Permit or PDIG." Thus, the cargo was loaded into the trucks of Schmitz and transported to the 5 warehouse of respondent, the consignee, in Apalit, Pampanga. Subsequently, the Customs Intelligence and Investigation Division (CIID) of the Bureau of Customs received information that the transfer of the shipment to respondent's warehouse was questionable. Upon investigation, the CIID found that the shipment was transported without an Import Entry having been filed and without payment of the duties and taxes due thereon. Consequently, on March 14, 1994, the CIID filed with the District Collector of Customs, Port of Manila, an application for the issuance of a warrant of seizure and detention against the cargo, docketed as Seizure Identification No. 94-055. The following day, the warrant of seizure and detention was issued. Meanwhile, prior to the return of the warrant, Alfredo S. Gloria, respondent's consultant, conferred with the Commissioner of Customs, herein petitioner, concerning respondent's shipment. As a result of the 6 conference, Gloria sent petitioner a letter dated March 16, 1994, attaching therewith the required Import Entry document covering the shipment and two checks, one for the amount of P5,000,000.00 and another forP4,944,864.00 representing the full payment of the duties and taxes due. On March 17, 1994, petitioner instructed its Special Assistant, Atty. Aaron Redubla, to accept the 7 payment and to process the release of the shipment to respondent. Accordingly, Atty. Redubla made a 8 notation on Gloria's letter that "per instruction," the shipment is "for further processing and release upon 9 payment of taxes and duties." Atty. Redubla then went to the Office of District Customs Collector Oscar 10 Brillo and the Cash Division to implement petitioner's instruction. In turn, District Collector Brillo 11 scribbled a note on Gloria's letter ordering the processing of respondent's payment. That same day

(March 17, 1994), respondent's checks were duly received by the Bureau of Customs of Manila per 12 Official Receipts Nos. 45981887 and 46051162. Notwithstanding the Bureau of Customs' acceptance of respondent's full payment of duties and taxes, District Collector Brillo still proceeded with the seizure and forfeiture proceedings. On August 3, 1994, he 13 rendered a Decision holding that "a violation of Section 2530 (f) and (l) - 3, 4 and 5 of the Tariff and 14 Customs Code was committed from the time the shipment was discharged from the vessel and taken to the warehouse of the consignee without legal documentation as required by laws and regulations for the 15 same and without payment of duties and taxes due thereon." Thus, the shipment was ordered "forfeited in favor of the Government, to be disposed of in the manner provided by law." The dispositive portion of the Decision reads: "WHEREFORE, it is hereby ordered and decreed that the shipment of 11,985 pieces of secondary steel billets subject of this seizure case be, as it is hereby, FORFEITED in favor of the Government, to be disposed of in the manner provided for by law. Let copies of this Decision be furnished all parties and offices concerned for their information and guidance. SO ORDERED." Respondent appealed to the Office of petitioner Commissioner of Customs, docketed as Customs Case No. 94-09. On September 8, 1994, Deputy Commissioner Licerio C. Evangelista, "by authority of the 16 Commissioner of Customs," rendered a Decision affirming the District Collector's Decision. Respondent's motion for reconsideration was likewise denied. Aggrieved, respondent filed with the Court of Tax Appeals (CTA) a petition for review, docketed as C.T.A. 17 Case No. 5160. In its Decision dated April 8, 1997, the CTA reversed and set aside petitioner's Decision. The CTA ruled that petitioner erred in ordering the seizure of the shipment because (1) at the time the shipment was transported to respondent's warehouse in Apalit, Pampanga, the same was "not released" from the Customs' custody "but was merely transferred or discharged under continuous customs guarding;" and (2) after respondent had fully paid the customs duties and taxes due on the shipment, the same should have been released by petitioner to respondent. The dispositive portion of the CTA Decision reads: "WHEREFORE, in view of the foregoing, the instant petition for review is hereby GRANTED. The assailed Decision of the respondent in Customs Case No. 94-09 (Manila Seizure Identification No. 94-055) is hereby REVERSED and SET ASIDE. Accordingly, the Surety Bond (PGA Bond 16 No. HQ 34515-95/G No. 17997 as amended under Endorsement No. HQ-E-09398-96 in the total amount of P75,000,000.00) posted by the petitioner is ordered CANCELLED. SO ORDERED." Petitioner's motion for reconsideration was also denied in the CTA Resolution dated May 23, 1997.
18

On appeal by petitioner to the Court of Appeals, the latter affirmed the CTA Decision in its Decision dated 19 July 8, 1998. Petitioner filed a motion for reconsideration but was denied in a Resolution dated August 20 24, 1998. Hence, this petition. Petitioner contends that

"THE COURT OF APPEALS ERRED IN DISREGARDING THE FOLLOWING PROPOSITIONS: I THE SHIPMENT OF STEEL BILLETS WAS RELEASED TO RESPONDENT MILWAUKEE INDUSTRIES CORPORATION AND NOT MERELY TRANSFERRED OR DISCHARGED UNDER CONTINUOUS CUSTOMS GUARDING; and II CONSIDERING THAT AT THE TIME THE SHIPMENT WAS RELEASED, RESPONDENT FAILED TO COMPLY WITH THE REQUIREMENTS OF THE TARIFF AND CUSTOMS CODE, 21 THE IMPORTATION IS UNAUTHORIZED OR ILLEGAL, HENCE SUBJECT TO SEIZURE." Petitioner wants us to resolve (1) whether the shipment in question was released to respondent from the custody of the Customs authorities, as held by both petitioner and the District Collector of Customs, and not merely transferred to respondent's warehouse, as found by the CTA and affirmed by the Court of Appeals; and (2) whether respondent failed to comply with the customs requirements to justify the seizure and forfeiture of the shipment. Obviously, these issues entail a reevaluation of factual circumstances, a matter that normally cannot be 22 undertaken by this Court as it is not a trier of facts. However, we are constrained to resolve the issues raised since the findings of both petitioner and the District Collector of Customs on the one hand, are in conflict with those of the CTA and Court of Appeals, on the other. We have reviewed the records and we find the petition devoid of merit. Petitioner's contention that when the shipment in question was transported to respondent's warehouse in Apalit, Pampanga, the same was "released" from the custody of the Customs authorities is misplaced. It bears stressing that such transfer of the shipment was made by virtue of the Boat Notes issued by Customs Inspector Jimmy Pastoriza. He made a specific instruction in the Boat Notes that the shipment should be "under continuous guarding" by the Customs guard "until released by the Customs authorities," obviously because the customs duties and taxes due thereon have not yet been paid. Clearly, the physical and legal custody over the shipment remained with the Customs authorities. As ruled by the Court of Appeals: "In the Decision under review, public respondent CTA found and held inter alia that at the time of the transfer of the subject shipment to Milwaukee's factory, the same was not 'released' but merely transferred or discharged under 'continuous customs guarding.' The said factual finding of the CTA was based, among others, on the following corroborating evidence which belie petitioner's claim: (a) Boat Notes (Exhibits 'S' to 'S-12' and their sub-markings) signed by then Discharging Customs Inspector Pastoriza, majority of which contain a remark to wit: 'NOTE: Shipside discharge unto lighter under guard. Guard to remain in continuous duty until released by Customs proper authorities or upon proper presentation of a valid delivery permit or PDIG.'

b) Bill and/or statement demanding payment of overtime services rendered by Customs Guard in guarding the subject shipment of steel billets submitted by Customs Guard In charge Oscar Almendras and certified to by Discharging Inspector Pastoriza; and (c) Copy of Solidbank Check No. 08275 issued to Almendras (Exhibit 'O') and the dorsal part thereof showing the encashment and receipt of the check (Exhibit 'O-1') [as payment for services]. This court is not inclined to disturb public respondent CTA's factual finding, not only because the same is clearly and sufficiently supported by the above-enumerated evidence, but more importantly, said finding was categorically admitted by petitioner Commissioner of Customs in its motion for reconsideration to the CTA's Decision, to wit: 'It is not enough that duties and taxes are paid so that an importation may be considered legally terminated; it is also required that a legal permit for withdrawal shall have been granted. Such situation does not obtain in the case at bar. On the contrary, customs guards were posted at petitioner's premises in Apalit, Pamoanga, thereby showing that respondent never releasedthe shipment to petitioner.' In view of such admission on the part of petitioner, there is no question by now that at the time the subject shipment of steel billets was transferred to the factory of private respondent Milwaukee, said shipment was not released but allowed only to be transferred 'under continuous customs guarding' to the premises of private respondent by authority of the boat notes signed by Discharging Inspector Pastoriza. Simply put, since the said shipment was merely transferred 'under guard,' not released, the same then remained under the custody of the Bureau of Customs 23 for all legal intents and purposes." (Underscoring supplied) We sustain the findings of both the CTA and the Court of Appeals. It is axiomatic that their factual determination is generally binding upon this Court where, as here, it is sufficiently supported by the 24 evidence on record and there is no clear showing of any palpable error. Significantly, the District Collector of Customs contradicted himself when he categorically stated in his Decision that the shipment in question was never released to respondent, thus: "x x x it is not enough that duties and taxes are paid for an importation to be considered legally terminated; it is also required that a legal permit for withdrawal shall have been granted, which is not true in this case. On the contrary, x x x the Bureau of Customs posted guards at the premises of the consignee showing that the Bureau never released the shipment to the 25 claimant/importer." (Underscoring supplied) The order of release of the shipment came about only after Alfredo Gloria, respondent's consultant, presented to petitioner the import entry document covering the shipment and two checks as full payment of the duties and taxes due thereon. The undisputed fact is that it was petitioner who instructed Atty. Aaron Redubla, his Special Assistant, to direct District Collector of Customs Oscar Brillo to further process respondent's payment of the customs duties and taxes due on the shipment and to release the same upon full payment thereof. It is likewise undisputed that respondent's payment of the customs duties and taxes on the shipment was duly accepted by the Bureau of Customs on March 17, 1994. Hence, this legally terminated the importation of goods or articles as provided under Section 1202 of the Tariff and Customs Code, viz: "SECTION 1202. When Importation Begins and Deemed Terminated . Importation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with intention to unlade therein.Importation is deemed terminated upon payment of the duties, taxes and other

charges due upon the articles, or secured to be paid, at a port of entry and the legal permit for withdrawal shall have been granted, or in case said articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs." (Underscoring supplied) As regards the legal permit for withdrawal of the imported articles mentioned in the above provision, petitioner's order of release upon payment of taxes and duties on the shipment, indicated in the notation (Exhibit "M-1") made by his Special Assistant Atty. Redubla mentioned earlier, is a sufficient legal permit for the official release of the shipment transferred to respondent's warehouse. WHEREFORE, the petition is hereby DENIED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 44496 is AFFIRMED. SO ORDERED. Panganiban, (Chairman), Carpio-Morales, and Garcia, JJ., concur. Corona, J., on leave.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 156946 July 15, 2009

SECRETARY OF FINANCE, Petitioner, vs. ORO MAURA SHIPPING LINES, Respondent. DECISION BRION, J.: We resolve the petition filed by the Secretary of Finance (petitioner), assailing the Decision dated August 2 3 26, 2002, and Resolution dated January 20, 2003 of the Court of Appeals (CA) in CA-G.R. SP No. 4 64644. The CA affirmed the decision dated March 29, 2001 of the Court of Tax Appeals (CTA) holding that the assessment made by the Customs Collector of the Port of Manila on respondent Oro Maura Shipping Lines (respondent) vessel M/V "HARUNA" had become f inal and conclusive upon all parties, and could no longer be subject to re-assessment. FACTUAL ANTECEDENTS On November 24, 1992, the Maritime Industry Authority (MARINA) authorized the importation of one (1) unit vessel M/V "HARUNA"; ex: Shin Shu Maru No. 8, under a Bareboat Charter, for a period of five (5) years from its actual delivery to the charterer. The original parties to the bareboat charter agreement were Haruna Maritime S.A., represented by Mr. Yoji Morinaga of Panama, and Mr. Guerrero G. Dajao, proprietor and manager of Glory Shipping Lines, the charterer. On December 29, 1992, the Department of Finance (DOF), in its 1st Indorsement, allowed the temporary registration of the M/V "HARUNA" and its tax and duty-free release to Glory Shipping Lines, subject to the
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conditions imposed by MARINA. The Bureau of Customs (BOC) also required Glory Shipping Lines to post a bond in the amount equal to 150% of the duties, taxes and other charges due on the importation, conditioned on the re-exportation of the vessel upon termination of the charter period, but in no case to extend beyond the year 1999. On March 16, 1993, Glory Shipping Lines posted Ordinary Re-Export Bond No. C(9) 121818 for P1,952,000.00, conditioned on the re-export of the vessel within a period of one (1) year from March 22, 1993, or, in case of default, to pay customs duty, tax and other charges on the importation of the vessel in the amount ofP1,296,710.00. On March 22, 1993, the M/V "HARUNA" arrived at the Port of Mactan. Its Import Entry No. 120-93 indicated the vessels dutiable value to be P6,171,092.00 and its estimated customs duty to be P1,296,710.00. On March 22, 1994, Glory Shipping Lines re-export bond expired. Almost two (2) months after, or on May 10, 1994, Glory Shipping Lines sent a Letter of Guarantee to the Collector guaranteeing to renew the ReExport Bond on vessel M/V "HARUNA" on or before May 20, 1994; otherwise, it would pay the duties and taxes on said vessel. Glory Shipping Lines never complied with its Letter of Guarantee; neither did it pay the duties and taxes and other charges due on the vessel despite repeated demands made by the Collector of the Port of Mactan. Since the re-export bond was not renewed, the Collector of the Port of Mactan assessed it customs duties and other charges amounting to P1,952,000.00; thereafter, it sent Glory Shipping Lines several demand letters dated April 22, 1996, June 21, 1996, and March 10, 1997, respectively. Glory Shipping Lines failed to pay the assessed duties despite receipt of these demand letters. Unknown to the Collector of the Port of Mactan, Glory Shipping Lines had already offered to sell the vessel M/V "HARUNA" to the respondent in October 1994. In fact, the respondent already applied for an Authority to Import the vessel with MARINA on October 21, 1994, pegging the proposed acquisition cost of the vessel atP1,100,000.00. MARINA granted this request through a letter dated December 5, 1994, after finding that the proposed acquisition cost of the vessel reasonable, taking into consideration the vessels depreciation due to wear and tear. On December 2, 1994, Haruna Maritime S.A. and Glory Shipping Lines sold the M/V "HARUNA" to the respondent without informing or notifying the Collector of the Port of Mactan. On December 13, 1994, Kariton and Company (Kariton), representing the respondent, inquired with the DOF if it could pay the duties and taxes due on the vessel, with the information that the vessel was acquired by Glory Shipping Lines through a bareboat charter and was previously authorized by the DOF to be released under a re-export bond. The DOF referred Karitons letter to the Commissioner of Customs for appropriate action, per a 1st Indorsement dated December 13, 1994. In turn, the Commissioner of Customs, in a 2nd Indorsement dated December 14, 1994, referred the DOFs 1st Indorsement to the Collector of Customs of the Port of Manila. On the basis of these indorsements and the MARINA appraisal, Kariton filed Import Entry No. 179260 at the Port of Manila on behalf of the respondent. The Collector of the Port of Manila accepted the declared value of the vessel at P1,100,000.00 and assessed duties and taxes amounting to P149,989.00, which the respondent duly paid on January 4, 1995, as evidenced by Bureau of Customs Official Receipt No. 50245666. On November 5, 1997, after discovering that the vessel M/V "HARUNA" had been sold to the respondent, the Collector of the Port of Mactan sent the respondent a demand letter for the unpaid customs duties and charges of Glory Shipping Lines. When the respondent failed to pay, the Collector of the Port of

Mactan instituted seizure proceedings against the vessel M/V "HARUNA" for violation of Section 2530, par. 1, subpar. (1) to (5) of the Tariff and Customs Code of the Philippines (TCCP). In his September 1998 Decision, the Collector of the Port of Mactan ordered the forfeiture of the vessel in favor of the Government, after finding that both Glory Shipping Lines and the respondent acted fraudulently in the transaction. The Cebu District Collector, acting on the respondents appeal, reversed the decision of the Collector of the Port of Mactan in his December 1, 1998 decision, concluding that while there appeared to be fraud in the sale of the vessel M/V "HARUNA" by Haruna Maritime S.A. and Glory Shipping Lines to the 6 respondent, there was no proof that the respondent was a party to the fraud. Moreover, the Cebu District Collector gave weight to MARINAs appraisal of the dutiable value of the vessel. The decision also held that in light of this appraisal that the Collector of Custom of the Port of Manila used as basis for his assessment, the customs duty the Collector of the Port of Manila imposed was unquestionably proper. On December 14, 1998, the Commissioner of Customs, in a 3rd Indorsement, affirmed the decision of the Cebu District Collector and recommended his approval to the petitioner. In a 4th Indorsement dated January 8, 1999, the petitioner affirmed the Commissioners recommendation, but ordered a re-assessment of the vessel based on the entered value, without allowance for depreciation. The respondent filed a motion for reconsideration, which the petitioner denied. On May 15, 2000, the respondent filed a Petition for Review with the CTA, assailing the petitioners January 8, 1999 decision. In a decision dated March 29, 2001, the CTA granted the respondents petition and set aside the petitioners 4th Indorsement, thus affirming the previous decision of the Commissioner 10 of Customs. Dissatisfied with this outcome, the petitioner sought its review through a petition filed with the CA; he claimed that the CTA erred when it held that the petitioner no longer had authority to order the re11 assessment of the vessel. The CA affirmed the findings of the CTA in its decision dated August 26, 2002. The appellate court concluded that the assessment made by the Collector of the Port of Manila had already become final and conclusive on all parties, pursuant to Sections 1407 and 1603 of the TCCP; the respondent paid the assessed duties on January 4, 1995, while the Collector of the Port of Mactan demanded payment of additional duties and taxes only on November 5, 1997, or more than one year from the time the respondent paid. The CA also upheld the findings of the Cebu District Collector, of the Commissioner of Customs, and of the CTA that the fraud in this case could not be imputed to the respondent since it was not shown that the respondent knew about Glory Shipping Lines infractions. The CA subsequently denied petitioners Motion for Reconsideration in its resolution of January 20, 13 2003. Hence, this petition. THE PETITION The petitioner submits three issues for our resolution: I WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT THE ASSESSMENT MADE BY THE MANILA CUSTOMS COLLECTOR ON THE SUBJECT VESSEL HAD BECOME FINAL AND CONCLUSIVE UPON ALL PARTIES.
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II WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT WAS AN "INNOCENT PURCHASER." III WHETHER THE COURT OF APPEALS ERRED IN NOT HOLDING THAT A LIEN IN FAVOR OF THE GOVERNMENT AND AGAINST THE VESSEL EXISTS. The petitioner mainly argues that the CA committed a reversible error when it held that the assessment of the Customs Collector of the Port of Manila had become final and conclusive on all parties pursuant to Sections 1407 and 1603 of the TCCP. According to the petitioner, these provisions cannot limit the authority of the Secretary of Finance or the Commissioner of Customs to assess or collect deficiency duties; in the exercise of their supervisory powers, the Commissioner and the Secretary may at any time direct the re-assessment of dutiable articles and order the collection of deficiency duties. Even assuming that Sections 1407 and 1603 of the TCCP apply to the present case, the petitioner posits that the one14 year limitation set forth in these provisions presupposes that the return and all entries, as passed upon and approved by the Collector, reflect the accurate description and value of the imported article. Where the article was misdeclared or undervalued, the statute of limitations does not begin to run until a deficiency assessment has been issued and settled in full. Lastly, the petitioner claims that the respondent, being a direct and actual party to the importation, should have ensured that the imported article was properly declared and assessed the correct duties. The respondent, on the other hand, claims that the appraisal of the Collector can only be altered or modified within a year from payment of duties, per Sections 1407 and 1603 of the TCCP; it is only when there is fraud or protest or when the import entry was merely tentative that settlement of duties will not attain finality. The petitioners allegation that there was misdeclaration or undervaluation of the vessel is not supported by the evidence and is contrary to the findings of the District Collector of the Port of Cebu, which the petitioner himself affirmed in his 4th Indorsement dated January 8, 1999. Moreover, the records show that the value of the vessel was properly declared by the respondent at P1,100,000.00, pursuant to the appraisal of the MARINA. The core legal issue for our resolution is whether the Secretary of Finance can order a re-assessment of the vessel M/V "HARUNA." THE COURTS RULING We find the petition meritorious and rule that the petitioner can order the re-assessment of the vessel M/V "HARUNA." Procedural Issue The Collector of the Port of Mactan found that the respondent defrauded the BOC of the proper customs duty, but the District Collector of Cebu held otherwise on appeal and absolved the respondent from any participation in the fraud committed by Glory Shipping Lines. These factual findings and conclusion were affirmed by the Commissioner of Customs, by the CTA and, ultimately, by the CA. Although in agreement with the conclusion, the petitioner, however, ordered a reassessment of the dutiable value of the vessel based on the original entered value, without allowance for depreciation. Factual findings of the lower courts, when affirmed by the CA, are generally conclusive on the 15 Court. For this reason, the Rules of Court provide that only questions of law may be raised in a petition for review oncertiorari. We delve into factual issues and act on the lower courts factual findings only in

exceptional circumstances, such as when these findings contain palpable errors or are attended by 16 arbitrariness. After a review of the records of the present case, we find that the CTA and the CA overlooked and misinterpreted factual circumstances that, had they been brought to light and properly considered, would have changed the outcome of this case. In particular, a closer scrutiny of the surrounding circumstances of the case and the respondents actions reveal the existence of fraud that deprived the State of the customs duties properly due to it. A Critical Look at the Facts Our examination of the facts tells us that there are four significant phases that should be considered in appreciating the present case. The first phase is the original tax and duty-free entry of the MV Haruna when Glory Shipping Lines filed Import Entry No. 120-93 with the Collector of the Port of Mactan on March 22, 1993. The vessel then had a declared dutiable value of P6,171,092.00 and the estimated customs duty was P1,296,710.00. It was allowed conditional entry on the basis of a one-year re-export bond that lapsed and was not renewed. Despite a letter of guarantee subsequently issued by Glory Shipping Lines and repeated demand letters, no customs duties and charges were paid. The vessel remained in the Philippines. The second significant phase occurred when Glory Shipping Lines offered to sell the vessel to the respondent in October 1994. At that point, the respondent applied for an Authority to Import the vessel, based on the proposed acquisition cost of P1,100,000.00. MARINA granted the request based on the proposed acquisition cost, taking depreciation into account. From the first to the second phase, bad faith already intervened as Glory Shipping Lines, instead of paying in accordance with its commitment, simply turned around, disregarded the demand letters of the Collector of the Port of Mactan, and offered the vessel for sale to the respondent. The respondent, for its part, already knew of the status of the vessel (as it in fact subsequently manifested before the DOF); in fact, what it asked for was an authority to import, although the vessel was already in the Philippines. The respondent likewise was the party which secured an appraisal from MARINA knowing fully well of the vessels value based on its previous history. It also joined Glory Shipping Lines in the latters attempt to evade the payment of the customs duties and charges d emanded by the Collector of the Port of Mactan by pushing through with the purchase of the vessel without any notification to the Collector of the Port of Mactan - the Port that first administratively enforced the rules on the vessels importation resulting in its tax-free entry and conditional release. The third phase came when the respondents representative asked the DOF if it could pay the duties and taxes due on the vessel, knowing fully well the vessels history of entry into the country. The respondents declared value in the request was P1.1 Million based on the lower appraisal that it secured from MARINA. The DOF referred the matter to the Commissioner of Customs who in turn made his own referral to the Collector of Customs of the Port of Manila. It was the Collector of the Port of Manila who accepted the declared value ofP1.1 Million and assessed duties and taxes amounting to P149,989.00. The respondent thus paid the customs duties as approved by the Collector of the Port of Manila. As in the second phase, no notice was given in this third phase to the Port of Mactan as the Port that allowed the entry of the vessel into the country and which had existing demand letters for the customs duties and charges due on the vessel. The fourth phase started on November 5, 1997 when the Collector of the Port of Mactan acted after learning of the sale of the vessel to the respondent. The Collector eventually instituted seizure proceedings that led to the petition currently with us.

Evidence of Fraud The tie-up between Glory Shipping Lines and the respondent in the four phases identified above can better be appreciated if the surrounding facts are considered. An undisputed given in the narration of the four phases is the valuation of P6,171,092.00 that Glory Shipping Lines gave when the vessel first entered the country under Import Permit No. 120-93 on March 22, 1993. When the respondent made its request with the MARINA for authorization to import the same vessel after a span of only 19 months, the respondent proposed an acquisition cost of only P1,100,000.00. Consistent with this proposal, the respondent, through Kariton, gave the vessel the same declared value in its own Import Entry No. 179260 filed with the Collector of the Port of Manila. Thus, in a little over a year and a half, the declared value of the vessel decreased by P5,000,000.00, or an astonishing 80% of its original price. We find this drop in value within a short period of 19 months to be too fantastic to be accepted without question, even allowing for depreciation. Equally fantastic is the change in the customs duties, taxes and other charges due which fell from P1,296,710.00 in March 1993 to P149,989.00 in January 1995, all because of the sale, the new application by the vendee, and the change in the Port where the assessment and collection were made. The drop alone from the undisputed original entry valuation of P6,171,092.00 to the respondents new valuation of P1,100,000.00 (or a decrease of 80% from the original valuation) is already a prima facie evidence of fraud that the rulings below did not properly appreciate simply because they disregarded the records of the original entry of the vessel through the Port of Mactan. Section 2503 of the TCCP provides in this regard that: Section 2503. Undervaluation, Misclassification and Misdeclaration of Entry. When the dutiable value of the imported articles shall be so declared and entered that the duties, based on the declaration of the importer on the face of the entry, would be less by ten percent (10%) than should be legally collected, or when the imported articles shall be so described and entered that the duties based on the importers description on the face of the entry would be less by ten percent (10%) than should be legally collected based on the tariff classification, or when the dutiable weight, measurement or quantity of imported articles is found upon examination to exceed by ten percent (10%) or more than the entered weight, measurement or quantity, a surcharge shall be collected from the importer in an amount of not less than the difference between the full duty and the estimated duty based upon the declaration of the importer, nor more than twice of such difference: Provided, That an undervaluation, misdeclaration in weight, measurement or quantity of more than thirty percent (30%) between the value, weight, measurement, or quantity declared in the entry, and the actual value, weight, quantity, or measurement shall constitute a prima facie evidence of fraud penalized under Section 2530 of this Code: Provided, further, That any misdeclared or underdeclared imported articles/items found upon examination shall ipso facto be forfeited in favor of the Government to be disposed of pursuant to the provision of this Code. When the undervaluation, misdescription, misclassification or misdeclaration in the import entry is intentional, the importer shall be subject to the penal provision under Section 3602 of this Code. [Emphasis supplied.] The 80% drop in valuation existing in this case renders the consideration and application of Section 2503 unavoidable. Significantly, the respondent never explained the considerable disparity between the dutiable value declared by Glory Shipping Lines and the dutiable value it declared difference of P5,000,000.00 so as to overturn or contradict this prima facie finding of fraud. We note that the exercise of due diligence alone would have alerted it to Glory Shipping Lines acquisition cost and the vessels declared value at its first entry. The respondent, being in the shipping business, should have known the standard prices of vessels and that the value it proposed to MARINA, as described in the second phase above, is extraordinarily low

compared to the vessels originally declared valuation. All these strengthen, rat her than weaken, the prima facie evidence of fraud that the law dictates when an unconscionable disparity of valuations exists. Depreciation not factor in determining dutiable value Neither can the respondent hide behind the excuse that the vessels dutiab le value at P1,100,000.00 was approved by MARINA via the Authority to Import, taking into consideration the vessels depreciation brought about by its ordinary wear and tear. In the first place, we observe that nowhere in the TCCP does it state that the depreciated value of an imported item can be used as the basis to determine an imported 17 items dutiable value. Section 201 of P.D. No. 1464 (the Tariff and Customs Code of 1978) in this regard provides: Sec. 201. Basis of Dutiable Value. The dutiable value of an imported article subject to an ad valorem rate of duty shall be based on the cost (fair market value) of same, like or similar articles, as bought and sold or offered for sale freely in the usual wholesale quantities in the ordinary course of trade in the principal markets of the exporting country on the date of exportation to the Philippines (excluding internal excise taxes to be remitted or rebated) or where there is none on such date, then on the cost (fair market value) nearest to the date of exportation, including the value of all container, covering and/or packings of any kind and all other expenses, costs and charges incident to placing the article in a condition ready for shipment to the Philippines, and freight as well as insurance premium covering the transportation of such articles to the port of entry in the Philippines. Where the fair market value or price of the article cannot be ascertained thereat or where there exists a reasonable doubt as to the fairness of such value or price, then the fair market value or price in the principal market in the country of manufacture or origin, if it is not the country of exportation, or in a third country with the same stage of economic development as the country of exportation shall be used. When the dutiable value of the article cannot be ascertained in accordance with the preceding paragraphs or where there exists a reasonable doubt as to the cost (fair market value) of the imported article declared in the entry, the correct dutiable value of the article shall be ascertained by the Commissioner Of Customs from the reports of the Revenue or Commercial Attache (Foreign Trade Promotion Attache), pursuant to Republic Act Numbered Fifty-four Hundred and Sixty-six or other Philippine diplomatic officers or Customs Attaches and from such other information that may be available to the Bureau of Customs. Such values shall be published by the Commissioner of Customs from time to time. When the dutiable value cannot be ascertained as provided in the preceding paragraphs, or where there exists a reasonable doubt as to the dutiable value of the imported article declared in the entry, it shall be domestic wholesale selling price of such or similar article in Manila or other principal markets in the Philippines or on the date the duty become payable on the article under appraisement, on the usual wholesale quantities and in the ordinary course of trade, minus: (a) not more than twenty-five (25) per cent thereof for expenses and profits; and (b) duties and taxes paid thereon. (as amended by E.O. 156) [Emphasis supplied.] Even assuming that the depreciated value of the vessel can be considered in determining the vessels dutiable value, still, we find that the decrease of 80% from the original price after the passage of only 19 months cannot be believed and thus should not be accepted. Assuming further that MARINA merely committed a mistake in approving the vessels propos ed acquisition cost at P1,100,000.00, and that the Collector of the Port of Manila similarly erred, we reiterate the legal principle that estoppel generally finds no application against the State when it acts to rectify 18 19 mistakes, errors, irregularities, or illegal acts, of its officials and agents, irrespective of rank. This

ensures efficient conduct of the affairs of the State without any hindrance on the part of the government from implementing laws and regulations, despite prior mistakes or even illegal acts of its agents shackling government operations and allowing others, some by malice, to profit from official error or misbehavior. 20 The rule holds true even if the rectification prejudices parties who had meanwhile received benefits. This principle is particularly true when it comes to the collection of taxes. As we stated in Intra-Strata 21 Assurance Corporation v. Republic of the Philippines: It has long been a settled rule that the government is not bound by the errors committed by its agents. Estoppel does not also lie against the government or any of its agencies arising from unauthorized or 22 illegal acts of public officers. This is particularly true in the collection of legitimate taxes due where the collection has to be made whether or not there is error, complicity, or plain neglect on the part of the 23 collecting agents. In CIR v. CTA, we pointedly said: It is axiomatic that the government cannot and must not be estopped particularly in matters involving taxes. Taxes are the lifeblood of the nation through which the government agencies continue to operate and with which the State effects its functions for the welfare of its constituents. Thus, it should be collected without unnecessary hindrance or delay. [Emphasis supplied.] The Respondents Complicity That the respondent fully participated in moves to defraud the BOC, as shown by the recital of the four phases above, is further supported by another factual circumstance the respondents acknowledgment to the DOF that the vessel M/V "HARUNA" conditionally entered the country under a re-export bond filed with the BOC. This is plain from the 1st Indorsement of the DOF dated December 13, 1994, which states: 1st Indorsement December 13, 1994 Respectfully forwarded to the Commissioner of Customs, Manila, for appropriate action, the herein letter of even date of Kariton & Company, requesting in behalf of their client, ORO MAURA SHIPPING LINE to pay the corresponding duties and taxes due on the vessel MV "HARUNA" (ex. Shinsu Maru No. 8) which was acquired by Glory Shipping Lines thru bareboat charter under P.D. No. 760, as amended and previously authorized by this Department to be released under a re-export bond pursuant to Section 1 of P.D. No. 1711 amending P.D. No. 760 under our 1st Indorsement dated December 29, 1992, copy attached, subject to pertinent import laws, rules and regulations. With the knowledge that the vessel was released under a re-export bond, the respondent should have known that this original entry was subject to specific conditions, among them, the obligation to guarantee the re-export of the vessel within a given period, or otherwise to pay the customs duties on the vessel. It should have known, too, of the conditions of the vessels release under the re -export bond and of the state of Glory Shipping Lines status of compliance. There was an original but incomplete importation by Glory Shipping Lines that the respondent could not have simply disregarded proceeds from knowledge of the vessels history and the application of the relevant law. In this respect, Section 1202 of the TCCP provides: Importation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with intention to unlade therein. Importation is deemed terminated upon payment of the duties, taxes and other charges due upon the articles, or secured to be paid, at a port of entry and the legal permit for withdrawal shall have been granted, or in case said articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs.

In order for an importation to be deemed terminated, the payment of the duties, taxes, fees and other charges of the item brought into the country must be in full. For as long as the importation has not been 24 completed, the imported item remains under the jurisdiction of the BOC. From the perspective of process, the importation that originally started with Glory Shipping Lines was therefore never completed and terminated, so that the respondents present importation is merely a continuation of that original process.lawphil.net Saddled with knowledge of the underlying facts that preceded its purchase, the conclusion that the respondent fully cooperated with Glory Shipping Lines in avoiding the original charges and duties due is unavoidable; the respondent provided the medium (1) to disregard the original duties due on the vessels first entry; and (2) to avoid the Port of Mactan where demands for payment of overdue custom duties already existed. In the process, it of course acted for its own interest by securing for itself lower dutiable values and lesser duties due. The fact that the respondent did all these confirms that it participated in the moves to defraud the BOC of the legitimate taxes due as originally assessed. Finality of the Port of Manila Assessment Our finding of fraud leads us to conclude that the assessment of the Collector of the Port of Manila cannot become final and conclusive pursuant to Section 1603 of the TCCP, which states: Section 1603. Finality of Liquidation. When articles have been entered and passed free of duty or final adjustments of duties made, with subsequent delivery, such entry and passage free of duty or settlements of duties will, after the expiration of one (1) year, from the date of the final payment of duties, in the absence of fraud or protest or compliance audit pursuant to the provisions of this Code, be final and conclusive upon all parties, unless the liquidation of the import entry was merely tentative. Nature of a tax lien An important factual circumstance that the CTA and the CA appear to have completely overlooked is that the vessel first entered the Philippines through the Port of Mactan and it was the Collector of the Port of Mactan who first acquired jurisdiction over the vessel when he approved the vessels temporary release from the custody of the BOC, after Glory Shipping Lines filed Ordinary Re-Export Bond No. C(9) 121818. When this re-export bond expired on March 22, 1994, Glory Shipping Lines filed a letter dated May 10, 1994 guaranteeing the renewal of the re-export bond on or before May 20, 1994, otherwise the duties, taxes and other charges on the vessel would be paid. Therefore, when May 20, 1994 came and went without the renewal of the vessels re-export bond, the obligation to pay customs duties, taxes and other charges on the importation in the amount of P1,296,710.00 arose and attached to the vessel. Undoubtedly, this lien was never paid by Glory Shipping Lines, thus it continued to exist even after the vessel was sold to the respondent. Section 1204 of the TCCP in this regard states: Section 1204. Liability of Importer for Duties. Unless relieved by laws or regulations, the liability for duties, taxes, fees and other charges attaching on importation constitutes a personal debt due from the importer to the government which can be discharged only by payment in full of all duties, taxes, fees and other charges legally accruing. It also constitutes a lien upon the articles imported which may be enforced while such articles are in custody or subject to the control of the government. As defined by Blacks Law Dictionary, a lien is a claim or charge on property for payment of some debt, 25 obligation or duty. In this particular instance, the obligation is a tax lien that attaches to imported goods, 26 regardless of ownership. Consequently, when the respondent bought the vessel from Glory Shipping Lines on December 2, 1994, the obligation to pay the BOC P1,296,710.00 as customs duties had already attached to the vessel and

the non-renewal of the re-export bond made this liability due and demandable. The subsequent transfer of ownership of the vessel from Glory Shipping Lines to the respondent did not extinguish this liability. Therefore, while it is true that the respondent had already paid the customs duties assessed by the Collector of the Port of Manila, this payment did not have the effect of extinguishing the lien given the tax lien that had attached to the vessel and the fact that what had been paid was different from what was owed. From the point of amount alone, the customs duties paid to the Collector at the Port of Manila only amounted to P149,989.00, while the lien which had attached to the vessel based on the unpaid assessment by the Collector of the Port of Mactan amounted to P1,296,710.00. Finally, we deem it necessary to reiterate our pronouncement in Chevron Philippines v. Commissioner of 27 the Bureau of Customs, where we discussed the importance of tariff and customs duties in the following manner: Taxes are the lifeblood of the nation. Tariff and customs duties are taxes constituting a significant portion of the public revenue which enables the government to carry out the functions it has been ordained to 28 perform for the welfare of its constituents. Hence, their prompt and certain availability is an imperative 29 30 need and they must be collected without unnecessary hindrance. [Emphasis supplied.] In keeping with this and other cited rulings, we find in favor of the petitioner and uphold his order for the re-assessment of the value of the vessel based on the entered value, which in this case should follow the unpaid assessment made by the Collector of Customs of the Port of Mactan. WHEREFORE, we REVERSE the decision of the Court of Appeals dated August 26, 2002 in CA-G.R. SP No. 64644, and REINSTATE WITH MODIFICATION the ruling under former Finance Secretary Edgardo Espiritus 4th Indorsement dated January 8, 1999. The re-assessment shall be based on the unpaid assessment by the Collector of Customs of the Port of Mactan against respondent Oro Maura Shipping Lines dated November 5, 1997, made on the basis of M/V HARUNAs entered value, without allowance for depreciation, but including other taxes and charges due. Seizure proceedings shall proceed in due course unless the unpaid customs duties, other taxes and charges are duly paid. Costs against the petitioner. SO ORDERED. ARTURO D. BRION Associate Justice

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 180597 November 7, 2008

RAUL BASILIO D. BOAC, RAMON B. GOLONG, CESAR F. BELTRAN, and ROGER A. BASADRE,petitioners vs. PEOPLE OF THE PHILIPPINES, respondent. DECISION

VELASCO, JR., J.: This appeal by certiorari under Rule 45 seeks to set aside the August 16, 2007 Decision of the Sandiganbayan, finding petitioners guilty beyond reasonable doubt of violating Section 2203 of the Tariff and Customs Code. Petitioners' motion for reconsideration was denied by the court through its November 2 14, 2007 Resolution. The Facts Raul Basilio Boac, Ramon Betuin Golong, Cesar Fantone Beltran, Roger Alcantara Basadre, and Benjamin Castaneda Alfonso are members of the Philippine National Police (PNP)-Criminal Investigation and Detection Group (CIDG). They hold the ranks of Police Senior Superintendent, Police Inspector, Senior Police Officer II, Senior Police Officer II, and Senior Police Officer I, respectively. In an information dated October 18, 2005, they were charged with violation of Sec. 2203 in relation to Sec. 3612 of the Tariff and Customs Code, as follows: That on or before July 27, 2004 or prior or subsequent thereto in Cagayan de Oro City and within the jurisdiction of this Honorable Court, above-named accused P/SR. SUPT. RAUL BASILIO DONIDA BOAC, SG-26, P/INSP. RAMON BETUIN GOLONG, SG-22, SPO2 CESAR FANTONE BELTRAN, SG-17, SPO2 ROGER ALCANTARA BASADRE, SG-17, SPO1 BENJAMIN CASTANEDA ALFONSO, SG-16, all public officers being then members of the Philippine National Police, taking advantage of their official positions, while committing the offense in relation to office, with grave abuse thereof, conspiring, confederating and mutually helping one another, did then and there willfully, unlawfully and criminally, without lawful authority or delegation from the Collector of Customs, flag down, search and seize three (3) container vans consigned to Japan Trak surplus (Kakiage Surplus). CONTRARY TO LAW.
3 1

Boac, Golong, and Beltran pleaded not guilty on January 23, 2006; Basadre entered the same plea on February 20, 2006. Alfonso remained at large. At pretrial, the prosecution and defense stipulated that in the evening of July 27, 2004, Golong, Beltran, Basadre, and Alfonso, upon the order of Boac, but without the authority from and coordination with the Bureau of Customs (BOC), Collection District X, Cagayan de Oro City, flagged down three container vans consigned to Kakiage Surplus. The said vans were allowed 4 to be brought to the warehouse of the consignee and the actual search was done on July 28, 2004. Atty. Lourdes V. Mangaoang, then Customs District Collector of Cagayan de Oro City, testified that the CIDG operatives (herein petitioners) did not have a written authority from the Commissioner of Customs or the District Collector. According to her, Golong claimed that they had clear orders from Boac to open and search the vans. She instructed her personnel to open the vans only to show that there was nothing illegal in their contents. She prepared a letter of protest addressed to Boac but it was ignored; hence, she 5 filed the instant case. Dario C. Amolata, license customs broker, testified that he went to see the vans after learning that they were flagged down by petitioners. The following day, he went to the warehouse with Melvin Yamit and Richard Godoy of the Enforcement and Security Services of the BOC, Region X to witness the inspection 6 of the vans. No contrabands were found upon inspection. Yamit corroborated the testimony of Amolata. For the defense, Boac testified that on July 27, 2004, he was in Manila on leave. Beltran allegedly informed him that three container vans with contrabands were released by the BOC; thus, Boac instructed Golong and his team to flag down the subject vans. After the inspection of the vans and without finding any contraband, Boac directed Golong to leave the premises. Golong corroborated Boac's testimony, adding that he and his team did not open the vans on July 27, 2004 because there were no representatives from the BOC. Beltran testified that in the morning of July 27, 2004, Voltaire Sabelina, an

appraiser from the BOC, informed him that three container vans will be released from the pier around 5:00 p.m. It was alleged that inside the two of the uninspected containers were television sets from 7 Japan. Ruling of the Sandiganbayan In convicting petitioners, the Sandiganbayan applied the following provisions of the Tariff and Customs Code: Section 602. The Bureau of Customs, headed by a Commissioner, has, among other things, the following general duties, powers and jurisdiction, in respect to the levy of customs duties, to wit: xxxx b. The prevention and suppression of smuggling and other frauds upon the customs; xxxx j. The enforcement of the tariff and customs laws and all other laws, rules and regulations in relation to the tariff and customs administration. Sec. 2203. Persons Having Police Authority. - For the enforcement of the tariff and customs laws, the following persons are authorized to effect searches, seizures and arrests conformably with the provisions of said laws. xxxx d. Officers generally empowered by law to effect arrests and execute processes of the courts, when acting under the direction of the Collector. Sec. 3612. Violations of Tariff and Customs Laws and Regulations in General. - Any person who violates a provision of this Code or regulations pursuant thereto, for which delinquency no specific penalty is provided, shall be punished by a fine of not more than one thousand pesos or by imprisonment for not more than one year, or both. If the offender is an alien, he shall be deported after serving the sentence; and if the offender is a public official or employee, he shall suffer disqualification to hold public office, to vote and participate in any public election for ten years. The anti-graft court ruled that petitioners belong to the category of officers in Sec. 2203(d); thus, they needed a written authority from the Commissioner of Customs or District Collector in order to conduct searches, seizures and arrests. In this case, the court said, the prosecution established the lack of said written authority; even Beltran and Golong admitted that they did not have any authorization to search the vans. The court stated: Verily, it was evident in the above-quoted provisions of Sec. 602 and Sec. 2203 of the Tariff and Customs Code that indeed the Tariff and Customs Code vested upon the Bureau of Customs the authority to enforce the tariff and customs laws, including the prevention and suppression of smuggling and other frauds committed against it. The PNP-CIDG cannot arrogate upon itself the power which, under the law, is exclusively vested to the Collector of Customs. The PNP-CIDG can only effect search and seizure upon the direction 8 of the Collector of Customs. Hence, it cannot on its own effect search and seizure. On August 16, 2007, the Sandiganbayan rendered the assailed judgment, the fallo of which reads:

WHEREFORE, the Court finds accused P/Sr. Supt. Raul Basilio Donida Boac, P/Insp. Ramon Betuin Golong, SPO2 Cesar Fantone Beltran and SPO2 Roger Alcantara Basadre GUILTY, beyond reasonable doubt, for violation of Section 2203 of the Tariff and Customs Code, and, pursuant to Section 3612 thereof, are hereby sentenced each to suffer the penalty of: (A) imprisonment of one (1) year; (B) pay the fine of ONE THOUSAND PESOS (P1,000.00); and (C) disqualification to hold public office, to vote and participate in any public election for ten years. SO ORDERED.
[9]

On November 14, 2007, the Sandiganbayan denied petitioners' motion for reconsideration. Thus, we have this petition. Assigned Errors THE COURT A QUO ERRED IN FINDING THE PETITIONERS GUILTY BEYOND REASONABLE DOUBT OF VIOLATION OF SECTION 2203 OF THE TARIFF AND CUSTOMS CODE DESPITE THE ABSENCE IN ITS OWN FINDINGS THAT THE PETITIONERS/ACCUSED CONDUCTED SEARCH, SEIZURE OR ARREST AND DESPITE THE EVIDENCE FROM BOTH PARTIES THAT THE PETITIONERS DID NOT CONDUCT SEARCH, SEIZURE OR ARREST IN THE INSTANT CASE. THE COURT A QUO ERRED IN RULING THAT AUTHORITY OR DELEGATION FROM THE COLLECTOR OF CUSTOMS IS REQUIRED WHEN THE PETITIONERS FLAGGED DOWN THE CONTAINER VANS OUTSIDE THE TERRITORIAL JURISDICTION OF THE COLLECTOR OF CUSTOMS IN THE EXERCISE OF THEIR OFFICIAL DUTIES AS POLICE OFFICERS. Petitioners assert that they did not conduct any search, seizure, or arrest; hence, there was no violation of the Tariff and Customs Code. During the search conducted in the consignee's warehouse on July 28, 2004, the employees of the owner of the shipment unloaded the goods under BOC personnel supervision. Petitioners allege that they only witnessed the search; they did not make any seizures or arrests. After searching the first van and half of the second van without any contraband being found, Customs Police Yamit and Godoy decided to stop the search despite the request of petitioners to continue. Since the Customs Police were already leaving the area, Boac instructed his team to leave the 10 vicinity. Petitioners further claim that the police's authority to stop, search, and effect seizure and arrest, if necessary, is no longer exclusively vested on the Collector of Customs. Regular PNP members are generally empowered by law to effect arrests in accordance with Republic Act No. (RA) 6975, to wit: Section 24. Powers and Functions. The PNP shall have the following powers and functions: (a) Enforce all laws and ordinances relative to the protection of lives and properties; (b) Maintain peace and order and take all necessary steps to ensure public safety; (c) Investigate and prevent crimes, effect the arrest of criminal offenders, bring offenders to justice and assist in their prosecution;

(d) Exercise the general powers to make arrest, search and seizure in accordance with the Constitution and pertinent laws; xxxx In addition, the PNP shall absorb the office of the National Action Committee on Anti-Hijacking (NACAH) of the Department of National Defense, all the functions of the present Philippine Air Force Security Command (PAFSECOM), as well as the police functions of the Coast Guard. In order to perform its powers and functions efficiently and effectively, the PNP shall be provided 11 with adequate land, sea, and air capabilities and all necessary material means of resources. Petitioners, as members of the PNP-CIDG, also have the following functions under RA 6975: Section 35. Support Units. The PNP shall be supported by administrative and operational support units. The administrative support units shall consist of x x x xxxx (4) Criminal Investigation Unit. Headed by a Director with the rank of chief superintendent, the Criminal Investigation Unit shall undertake the monitoring, investigation and prosecution of all crimes involving economic sabotage, and other crimes of such magnitude and extent as to indicate their commission by highly placed or professional criminal syndicates and organizations. This unit shall likewise investigate all major cases involving violations of the Revised Penal Code and operate against organized crime groups, unless the President assigns the case exclusively to the National Bureau of Investigation (NBI). Petitioners contend that they were investigating a possible connivance of smugglers with some corrupt customs personnel. They maintained that their act of flagging down the container vans was not connected with the enforcement of the tariff and customs laws, smuggling being a form of economic sabotage which is within the powers of the PNP-CIDG to monitor and investigate. Thus, according to them, no prior authority from the Collector of Customs is required in performing their duties as police officers. Besides, they said they immediately coordinated with the Customs Police for the latter to conduct the actual search 12 of the container vans; hence, there was no violation of Sec. 2203. The Court's Ruling The petition is meritorious. Petitioners should be acquitted of the charge. The prosecution has the burden of proving the guilt of the accused beyond reasonable doubt. In this case, it is clear that petitioners neither searched the container vans nor effected seizure and arrest. The testimony of Customs Broker Amolata, the prosecution witness, supports this finding: Atty. Llamas: Q: A: Q: A: Did the PNP-CIDG personnel open the container vans? No, Sir. They did not open the container vans? Yes, Sir.

Q: You mentioned that you were able to talk with the PNP-CIDG personnel and they agreed to bring the trucks or the container vans to the warehouse of the consignee. Is that correct? A: Yes, Sir.

Q: Were the container vans opened in the evening of July 27, 2004 after the trucks were brought to the place of the consignee, were they opened? Prosecutor Lubigan: Your Honors, what particular time and date is he referring to, Your Honors? Atty. Llamas: In the evening, Your Honors, after the container vans were brought to the warehouse of the consignee on July 27, 2004 whether the container vans were opened in the evening of July 27, 2004, Your Honors. Witness: No, Sir.
13

It should be noted that the container vans were brought to the consignee's warehouse and not to the CIDG headquarters. On July 28, 2004, the container vans were searched but not by petitioners, as testified to by petitioners Beltran and Golong, as follows: (SPO2 Cesar Beltran) Q: A: Q: A: Q: A: Q: A: Okay, what happened when Yamit and Godoy arrived? They talked with the owner of the container vans and they opened the container vans. Who ordered the opening of the container vans? The persons from the Bureau of Customs and Mr. Bernales, the owner. What happened, after it was opened? They unloaded the cargoes. Where were you during that time? We were just there watching the unloading of the contents.
[14]

(Police Inspector Ramon Golong) Q: So, what happened there?

A: One of the container vans was being unloaded when I arrived while we act as observers during the stripping of the contents. The employees of the owner of the shipment were unloading 15 the shipment while the Customs people were supervising them.

The prosecution does not rebut the above testimonies of petitioners. In fact, when questioned by Associate Justice Norberto Y. Geraldez, the prosecution witness, Customs Broker Amolata, attested to the same fact as follows: Justice Geraldez: Q: A: Who brought out the items from the container vans? The employees of the consignee, Your Honors.

Q: The PNP-CIDG personnel or the accused did not search, they were just witnessing the bringing out of the items? A: They were witnessing also, Your Honors, similar of what were being done by the employees or personnel of the Environment and Security Services of the Bureau of Customs as well as myself, Your Honors. Q: A: Did they search the items as if they were looking for something? I cannot remember anymore, Your Honors.
16

When examined by the prosecutor, Amolata testified: Q: Did the PNP-CIDG personnel seize any equipment on that shipment? Did they seize any equipment inside the container vans? Did they seize anything, did they take anything, did they get anything inside those three container vans? A: Q: A: No, Sir. So there was no seizure, Mr. Witness? They did not seize anything? Yes, Sir.

Q: Did they make any arrest, did they arrest anybody who were there on the 27th and on the 28th of July 2004? A: No, Sir.

Q: And the searching was-the opening and the taking out of the equipment were done by the employees of Kakiage Surplus. Am I right, Mr. Witness? A: Q: A: Yes, Sir. It was not done by the PNP-CIDG personnel? Yes, Sir.
17

The search was actually conducted by Customs Police Yamit and Godoy on July 28, 2004. The Customs Police held the keys of the vans, as attested to by Amolata: Q: Who has the keys to these container vans, if you know?

A: The keys of the container vans were kept by Captain Capacite of the Enforcement and Security Services of the Bureau of Customs, Sir. Q: And what is the business of this Captain Capacite, Mr. Witness, who is from the Bureau of customs in holding that keys despite the fact that the container vans were already released by the Bureau of customs Region 10? A: He requested to have the keys of the container vans to be kept to him because according to him, the following morning he should also be there inside the premises of the consignee to also witness the stripping or taking out of the contents of the container vans, Sir. xxxx Q: Would you agree with me, Mr. Witness, that Yamit and Godoy has the keys with them on July 28, 2004? A: I do not know, Sir, whether the keys were being given by Captain Capacite to them.

Q: And Yamit and Godoy were direct subordinates of this Captain Capacite. Would you confirm that? A: Q: A: Yes, Sir. And the keys were with Capacite? Yes, Sir.

Q: Is it normal procedure despite the fact that the container vans were already released by the Bureau of Customs, the keys to the container are still held by Captain Capacite? xxxx A: Q: A: Not normal procedure, Sir. Not normal procedure, Mr. Witness? Yes, Sir.
18

Furthermore, the vans were opened without the presence of the PNP-CIDG's team leader, Inspector Golong. Golong testified: Q: During the next day, July 28, 2004, could you tell us what happened?

A: The following day when I arrived at Barangay Agusan, the container vans were already 19 opened. The Bureau of Customs people and the owner were already there. The search was under the direction of the Customs Police because when the Customs Police decided to stop the search, petitioners acceded and left the premises. Boac testified: Q: What happened next?

A: About after lunch already about 1:30 to 2:00 o'clock in the afternoon he called me again informing me that the customs personnel are already leaving the premises and I asked him what happened. He told me that the customs personnel are leaving and were satisfied that there are no contents on the container vans, however, he told me that the third container van was not stripped off of its contents and I asked Mr. Golong why and I told Inspector Golong to talk to one of the customs personnel to continue stripping the container van. xxxx I talked to Mr. Yamit since Inspector Golong told me that they are already stripping the contents of the third container van and they were already leaving the place, so I instructed Inspector Golong if I could talk to Yamit and ask Yamit if they could continue the stripping of the vans, so he gave me the phone and I talked to Mr. Yamit and told him to continue stripping the third container van up to the last contents. He told me they are already satisfied that there are no contraband items in the container vans but I insisted to just continue stripping the contents of the container van and he told me that they are already being called by their customs collector in Region 10, sir. Q: After this conversation, what did you do?

A: So, when they are already leaving the place, the customs people, I also ordered Inspector Golong to immediately leave the place because customs personnel are already leaving and they 20 don't have anymore business being there since customs personnel are leaving the place. The foregoing testimony, which Golong corroborated, was not disputed by the prosecution. It is thus very clear that the search was not done by petitioners but by the Customs Police. Petitioners did not seize anything nor arrested anybody. They merely observed the search which they requested to be undertaken to check for contrabands. Notably, the consignee did not file any complaint against petitioners. The information charged petitioners for illegally flagging down, searching, and seizing the three container vans on July 27, 2004. Petitioners, however, could not also be held liable for these acts. It is a fact that no search and seizure of the vans was done on the night of July 27, 2004. The act of flagging down the vehicles is not among those proscribed by Sec. 2203 of the Tariff and Customs Code. Mere flagging down of the container vans is not punishable under the said law. We ruled in People v. Ganguso: An accused has in his favor the presumption of innocence which the Bill of Rights guarantees. Unless his guilt is shown beyond reasonable doubt, he must be acquitted. This reasonable doubt standard is demanded by the due process clause of the Constitution which protects the accused from conviction except upon proof beyond reasonable doubt of every fact necessary to constitute the crime with which he is charged. The burden of proof is on the prosecution, and unless it discharges that burden the accused need not even offer evidence in his behalf, and he would be entitled to an acquittal. Proof beyond reasonable doubt does not, of course, mean such degree of proof as, excluding the possibility of error, produce absolute certainty. Moral certainty only is required, or that degree of proof which produces conviction in an unprejudiced mind. The 21 conscience must be satisfied that the accused is responsible for the offense charged. Well-entrenched in jurisprudence is the rule that the conviction of the accused must rest, not on the weakness of the defense, but on the strength of the prosecution. The burden is on the prosecution to 22 prove guilt beyond reasonable doubt, not on the accused to prove his innocence. In this case, the prosecution failed to show that petitioners committed the acts prohibited by Sec. 2203 of the Tariff and Customs Code. There is no such evidence, testimonial or otherwise, that identifies petitioners as responsible for the alleged illegal search. Hence, acquittal is in order.

As regards the second issue, there is no conflict between the aforequoted provisions of the Tariff and Customs Code and RA 6975, as amended. The jurisdiction of the Commissioner of Customs is clearly with regard to customs duties. Should the PNP suspect anything, it should coordinate with the BOC and obtain the written authority from the Collector of Customs in order to conduct searches, seizures, or arrests. Coordination is emphasized in the laws. While it is an admitted fact that there was no such coordination initiated by the PNP-CIDG in this instance, nevertheless, petitioners cannot be convicted under the Tariff and Customs Code since there is no evidence that they did actually search the container vans. WHEREFORE, the August 16, 2007 Decision and November 14, 2007 Resolution of the Sandiganbayan are REVERSED and SET ASIDE. Petitioners are ACQUITTED of the charge against them. No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT THIRD DIVISION G.R. No. 146706. July 15, 2005 TOMAS SALVADOR, Petitioners, vs. THE PEOPLE OF THE PHILIPPINES, Respondents. DECISION SANDOVAL-GUTIERREZ, J.: At bar is the petition for review on certiorari filed by Tomas Salvador assailing the Decision dated August 9, 2000 and Resolution dated January 9, 2001 of the Court of Appeals in CA-G. R. CR No. 20186. On the wee hours of June 4, 1994, Aurelio Mandin, Danilo Santos and petitioner Tomas Salvador, then aircraft mechanics employed by the Philippine Air Lines (PAL) and assigned at the Ninoy Aquino Intern ational Airport (NAIA) and Manila Domestic Airport, were nabbed by intelligence operatives of the Philippine Air Force (PAF) for possessing thirteen (13) packets containing assorted smuggled watches and jewelries valued at more than half a million pesos. Consequently, they were charged before the Regional Trial Court (RTC), Branch 117, Pasay City with violation of Section 3601 of the Tariff and Customs Code, docketed as Criminal Case No. 94-5843. The Information reads: "That on or about the 4th day of June 1994 at the NAIA/Domestic Airport vicinity, Pasay City and within the jurisdiction of this Honorable Court, the above-named accused conspiring, confederating and mutually helping one another, did then and there, willfully, unlawfully, and felonious assist in the concealment and unlawful importation of the following items: 198 pieces of means watches P187,110.00 76 pieces of mens diving watches 8,640.00
1 2

32 pieces of ladies watches 11,600.00 1600 grams of assorted jewelry. 322,000.00 with a total market value of P537,500.00 FIVE HUNDRED THIRTY-SEVEN THOUSAND THREEE HUNDRED FIFTY PESOS, more or less, Philippine Currency, without authority or permit from proper authorities. CONTRARY TO LAW."
3

When arraigned, all the accused, duly assisted by counsel, pleaded not guilty to the charge. Trial on the merits then ensued. The prosecution established the following facts: On June 3, 1994, a Special Mission Group from the PAF Special Operations Squadron, headed by Major Gerardo B. Pagcaliuangan and composed of Sgts. Rodolfo A. Teves, Geronimo G. Escarola, Virgilio M. Sindac and Edwin B. Ople, conducted routine surveillance operations at the Manila Domestic Airport to check on reports of alleged drug trafficking and smuggling being facilitated by certain PAL personnel. Major Pagcaliuangan then ordered Sgts. Teves and Ople to keep close watch on the second airplane parked inside the Domestic Airport terminal. This aircraft is an Airbus 300 with tail number RPC-3001. It arrived at the NAIA at 10:25 in the evening of June 3, 1994 from Hong Kong as Flight No. PR-311. After its passengers disembarked and its cargo unloaded, it was towed by the PAL ground crew and parked at the ramp area of the Domestic Airport terminal. At around 11:30 that same evening, Sgt. Teves reported over his radio that three (3) persons had boarded the Airbus 300. The team did not move, but continued its surveillance. At 12:15 a.m. the following day (June 4), Sgt. Teves reported that the three (3) persons who earlier boarded the Airbus 300 had disembarked with their abdominal areas bulging. They then boarded an airplane tow truck with its lights off. The PAF surveillance team promptly boarded their vehicles and followed the aircraft tow truck. At the Lima Gate of the Domestic Airport, the team blocked and stopped the tow truck. Sgt. Teves then got off, identified himself and asked the four (4) persons on board to alight. They were later identified as Tomas Salvador, petitioner, Aurelio Mandin, Danilo Santos and Napoleon Clamor, the driver of the tow truck. Sgt. Teves approached Aurelio Mandin. He noticed that Mandins uniform was partly open, showing a girdle. While Sgt. Teves was reaching for the girdle, a package wrapped in brown packaging tape fell. Suspecting that the package contained smuggled items, Sgt. Teves yelled to his teammates, "Positive!" Thereupon, the rest of the team surrounded petitioner and his two co-accused who surrendered without a fight. The team searched their bodies and found that the three were wearing girdles beneath their uniforms, all containing packets wrapped in packaging tape. Mandin yielded five (5) packets, while petitioner and Santos had four (4) each. The team confiscated the packets and brought all the accused to the PAFSECOM Office. At around 8:00 oclock the following morning, Emilen Balatbat, an examiner of the Bureau of Customs, arrived at the PAFSECOM Office. She opened one of the packets and on seeing that it contained dutiable goods, she proceeded to weigh the thirteen (13) packets seized from the accused. She then prepared an 4 inventory of the items seized and listed the weight of the packets. Thereafter, she brought the seized packets to the In-Board Section, Bureau of Customs, Airport Office where their contents were identified

and appraised. The Bureau of Customs found 248 pieces of assorted watches and fourteen karat (14K) gold jewelries valued as follows: QTY. 10 6 8 5 UNIT pcs. pcs. pcs. pcs. DESCRIPTION Half-bangles with Charms Tricolors Bracelet with Charms Tricolors Bracelet (Tricolor) Bangles (3 pcs./set) Tricolor Babys Bangles with charm L-Bangles with charm L-Bangles L-Creolla Earrings TOTAL GRAMS 1,495 x P200.00/gm. Assorted Watches 204 24 16 4 4 62 34 ____ 248 The Investigating State Prosecutor conducted an inquest and thereafter recommended that petitioner and his co-accused be charged with violating Section 3601 of the Tariff and Customs Code. Accordingly, the Information, mentioned earlier, was filed with the RTC. After the prosecution rested its case, the accused filed a Joint Demurrer to Evidence. In an Order dated October 12, 1995, the trial court denied the demurrer and directed the accused to present their evidence. All the accused denied committing the offense charged, claiming they were framed-up by the military. pcs. pcs. pcs. pcs. pcs. pcs. pcs. pcs. Citizen M watches with black dial with gold metal bracelet (-1) x $25 Seiko 5 Ladies watches with blue dial with white metal bracelet (-1) x $25 Seiko Divers Watch Mens- Black dial with rubberized bracelet (-1) x $50 Seiko 5 Ladies watches with yellow dial with gold metal bracelet (1) x $25 Citizen L-watches with white dial (4) x $20 Seiko 5 Mens watches with yellow dial with gold metal bracelet (1) x $25 Seiko 5 Mens watches with black dial with gold metal bracelet (1) x $25 $2,600.00 600.00 800.00 100.00 80.00 1,550.00 850.00 $6,580.00 APPRAISED VALUE 122.8 gms. 52.4 gms. 64.2 gms. 155.3 gms. 18.2 gms. 68.5 gms. 112.3 gms. 901.56 gms. +P 299,052.00

Danilo Santos testified that on the night of June 3, 1994, he was assigned to the Airbus 300 with tail No. RPC-3001, joining three junior mechanics who were then working on said aircraft. He was conducting a visual check of the plane when a tow truck arrived on its way to Nichols Airfield. He told one of the junior mechanics that he would take a break and be back in an hour. He then boarded the tow truck. When it was near the Lima Gate, a jeep with four (4) men in civilian attire aboard approached him. The four pointed their firearms at him and, after searching him for drugs, he was frisked but nothing was found. He was nonetheless brought by the men to the PAFSECOM Office, then to Villamor Airbase Hospital for a medical examination and alcohol test. Thereafter, he was brought back to the PAFSECOM Office. There, another military man arrived and brought out a box containing packets. Then he and his companions were told to put on their mechanics uniforms and to wear girdles. The packets were placed on their bodies, after which they were photographed. He further testified that he was asked to sign a certain paper but was not allowed to read it thoroughly. During the investigation, he was not apprised of his rights nor assisted by a counsel. Petitioner Tomas Salvador likewise denied any knowledge of the questioned items seized from him. He testified that during the incident in question, he only boarded the tow truck to take a break at the PAL canteen. He saw a box on the tow truck but was not aware of its contents. After his arrest, he was made to sign a document under duress. Aurelio Mandin also denied committing the offense charged. He declared that after his arrest, he was made to sign a document by the PAF personnel, the contents of which he was not able to read. He signed it because he was struck with a .45 caliber handgun by one of the military men and threatened him with summary execution if he would not do so. He was not informed of his rights nor given the services of counsel during the investigation. After hearing, the trial court rendered its Decision convicting all the accused of the offense charged, thus: "WHEREFORE, in view of the foregoing, the Court finds the accused Aurelio Mandin y Liston, Danilo Santos y Antonio and Tomas Salvador y Magno GUILTY beyond reasonable doubt for violation of Section 3601 of the Tariff and Customs Code of the Philippines (TCCP). There being no aggravating or mitigating circumstance and applying the Indeterminate Sentence Law, the court sentences each of the accused to an indeterminate term of EIGHT (8) YEARS and ONE (1) DAY of prision mayor, as minimum, to TEN (10) YEARS of prision mayor, as maximum, and to pay a fine of EIGHT THOUSAND PESOS (P8,000.00), without subsidiary imprisonment in case of insolvency, and to pay the costs. The court also orders the forfeiture of the confiscated articles in favor of the Government. SO ORDERED."
5

All the accused then seasonably interposed an appeal to the Court of Appeals, docketed as CA-G.R. CR No. 20186. On August 9, 2000, the Appellate Court promulgated its Decision affirming the trial courts Decision, thus: "We cannot see any justification for the setting aside of the contested Decision. THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED. SO ORDERED."
6

They filed a motion for reconsideration but was denied in a Resolution dated January 9, 2001.

Only Tomas Salvador opted to elevate his case to this Court by way of the instant petition for review oncertiorari. He submits for our consideration the following assignments of error:

"I THE ESSENTIAL ELEMENTS OF THE CRIME CHARGED IN THE INFORMATION LIKE UNLAWFUL IMPORTATION, POSSESSION OF UNLAWFULLY IMPORTED ARTICLES AND CONSPIRACY IN THE COMMISSION OF THE SAME, WERE NEVER PROVEN BEYOND REASONABLE DOUBT. II THERE WAS NO PROBABLE CAUSE FOR THE ARREST AND SEARCH OF THE PERSONS OF THE ACCUSED. III THE ACCEPTANCE BY THE TRIAL COURT AND THE AFFIRMANCE BY THE APPELLATE COURT OF THE TESTIMONIES OF PROSECUTION WITNESSES, AS WELL AS ALL ITS DOCUMENTARY EXHIBITS, DESPITE THE FACT THAT THE SAME WERE APPARENTLY OBTAINED IN VIOLATION OF THE CONSTITUTIONAL RIGHTS OF THE ACCUSED WERE UNLAWFUL. IV THE DENIAL BY THE TRIAL COURT AND THE CONCURRENCE BY THE APPELLATE COURT OF 8 THE DEMURRER TO EVIDENCE WERE ALSO WITHOUT LEGAL BASIS." The above assignments of error boil down to these issues: (1) whether the seized items are admissible in evidence; and (2) whether the prosecution has proved the guilt of petitioner beyond reasonable doubt. On the first issue, petitioner contends that the warrantless search and seizure conducted by the PAF 9 operatives is illegal. Citing People v. Burgos, he maintains that at the time he and his co-accused were stopped by the PAF law enforces, they were unaware that a crime was being committed. Accordingly, the law enforcers were actually engaged in a fishing expedition in violation of his Constitutional right against unlawful search and seizure. Thus, the seized items should not have been admitted in evidence against him. The Office of the Solicitor General (OSG) counters that under the factual circumstances of the case at bar, there was sufficient probable cause for the PAF surveillance team to stop and search petitioner and his companions. They boarded the parked Air Bus 300 PAL plane at the time when there were no other PAL personnel working therein. They stayed inside the plane for sometime and surprisingly, came out with bulging waists. They then stopped and looked around and made apparent signals. All these acts were sufficient to engender a reasonable suspicion that petitioner and his colleagues were up to something illegal. Moreover, the search and seizure was conducted in connection with the enforcement of customs law when the petitioner and his co-accused were riding a motor vehicle. In addition, the search was conducted at the vicinity of Lima Gate of the Manila Domestic Airport which, like every gate in the airport perimeter, has a checkpoint. Finally, the petitioner and his companions agreed to the search after one of them was caught with a suspicious-looking packet. Under these circumstances, the search and seizure is legal and the seized items are admissible in evidence. We agree with the OSG. As a rule, the Bill of Rights prohibits intrusions by the law enforcers to a persons body, personal effects or residence, unless the same are conducted pursuant to a valid search warrant issued in compliance with the procedure mandated by the Constitution and the Rules of Court. Thus, Sections 2 and 3(2), Article 3 of the 1987 Constitution provide:

"SEC. 2. The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and no search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the persons or things to be seized. SEC. 3. xxx (2) Any evidence obtained in violation of this or the preceding section shall be inadmissible for any purpose in any proceeding. x x x." The above Constitutional provisions do not prohibit searches and seizures, but only such as areunreasonable. Our jurisprudence provides for privileged areas where searches and seizures may lawfully be effected sans a search warrant. These recognized exceptions include: (1) search of moving vehicles; (2) search in plain view; (3) customs searches; (4) waiver or consented searches; (5) stop-and10 frisk situations; and (6) search incidental to a lawful arrest. Here, it should be noted that during the incident in question, the special mission of the PAF operatives was to conduct a surveillance operation to verify reports of drug trafficking and smuggling by certain PAL personnel in the vicinity of the airport. In other words, the search made by the PAF team on petitioner and his co-accused was in the nature of a customs search. As such, the team properly effected the search 11 and seizure without a search warrant since it exercised police authority under the customs law. In Papa vs. Mago involving a customs search, we held that law enforcers who are tasked to effect the enforcement of the customs and tariff laws are authorized to search and seize, without a search warrant, any article, cargo or other movable property when there is reasonable cause to suspect that the said items have been introduced into the Philippines in violation of the tariff and customs law. They may likewise conduct a warrantless search of any vehicle or person suspected of holding or conveying the said articles, as in the case at bar. In short, Mago clearly recognizes the power of the State to foil any fraudulent schemes resorted to by importers who evade payment of customs duties. The Governments policy to combat the serious malady of smuggling cannot be reduced to futility and impotence on the ground that dutiable articles on which the duty has not been paid are entitled to the same Constitutional protection as an individuals private papers 13 and effects. Here, we see no reason not to apply this State policy which we have continued to affirm. Moreover, we recall that at the time of the search, petitioner and his co-accused were on board a moving PAL aircraft tow truck. As stated earlier, the search of a moving vehicle is recognized in this jurisdiction as a valid exception to the requirement for a search warrant. Such exception is easy to understand. A search warrant may readily be obtained when the search is made in a store, dwelling house or other immobile structure. But it is impracticable to obtain a warrant when the search is conducted in a mobile ship, aircraft or other motor vehicle since they can quickly be moved out of the 14 locality or jurisdiction where the warrant must be sought. Verily, we rule that the Court of Appeals committed no reversible error in holding that the articles involved in the instant controversy were validly seized by the authorities even without a search warrant, hence, admissible in evidence against petitioner and his co-accused. On the second issue, petitioner faults the Court of Appeals for readily sustaining the trial courts finding that the witnesses for the prosecution were credible, notwithstanding that their testimonies contain glaring
12

inconsistencies which tend to detract from their veracity. Petitioner submits that these inconsistencies create serious doubt which should have been resolved in his favor. We are not persuaded. After a careful examination of the purported inconsistencies mentioned by petitioner, we find that they do not relate with the elements of the offense charged. Rather, they tend to focus on minor and insignificant matters as for instance: which PAF operative was in possession of the hand-held radio; how the girdles (garters) were removed; and what time the aircraft in question arrived. It bears stressing that these inconsistencies detract from the fact that all members of the special PAF team who conducted the search positively identified the petitioner and his co-accused as the same persons who boarded the PAL plane; stayed therein for a significant length of time; disembarked in a manner which stirred suspicion from the team; and with unusually bulging uniforms, rode an aircraft tow truck towards Lima Gate where they were caught in flagrante delicto. As a rule, inconsistencies in the testimonies of witnesses which refer to trivial and insignificant details do 15 not destroy their credibility. Moreover, minor inconsistencies serve to strengthen rather than diminish the prosecutions case as they tend to erase suspicion that the testimonies have been rehearsed, thereby 16 negating any misgivings that the same were perjured. Section 3601 of the Tariff and Customs Code provides in part: "SEC. 3601. Unlawful Importation. Any person who shall fraudulently import or bring into the Philippines, or assist in so doing, any article contrary to law, or shall receive, conceal, buy, seal or in any manner facilitate the importation, concealment or sale of such article after importation, knowing the same to have been imported contrary to law, shall be guilty of smuggling xxx When, upon trial for violation of this section, the defendant is shown to have had possession of the article in question, possession shall be deemed sufficient evidence to authorize conviction, unless the defendant shall explain the possession to the satisfaction of the court: Provided, however, That payment of the tax due after apprehension shall not constitute a valid defense in any prosecution under this section." Smuggling is thus committed by any person who (1) fraudulently imports or brings into the Philippines or assists in importing or bringing into the Philippines any article, contrary to law, or (2) receives, conceals, buys, sells or in any manner facilitates the transportation, concealment, or sale of such article after 17 importation, knowing the same to have been imported contrary to law. Importation commences when the carrying vessel or aircraft enters the jurisdiction of the Philippines with intention to unload and is deemed terminated upon payment of the duties, taxes and other charges due upon the articles and the legal permit for withdrawal has been issued, or where the articles are duty-free, once the articles have left 18 the jurisdiction of the customs. In the instant case, the prosecution established by positive, strong, and convincing evidence that petitioner and his co-accused were caught red-handed by a team from the PAF Special Operations Squadron, while in the possession of highly dutiable articles inside the premises of the airport. The contraband items were taken by petitioner and his co-accused from a PAL plane which arrived from Hong Kong on the night of June 3, 1994. Petitioner and his colleagues then attempted to bring out these items in the cover of darkness by concealing them inside their uniforms. When confronted by the PAF team, they were unable to satisfactorily explain why the questioned articles were in their possession. They could not present any document to prove lawful importation. Thus, their conviction must necessarily be upheld.

Clearly, the Court of Appeals committed no reversible error in affirming the trial courts Decision convicting petitioner and his co-accused. WHEREFORE, the petition is DENIED. The appealed Decision and Resolution of the Court of Appeals in CA-G.R. CR No. 20186 are AFFIRMED IN ALL RESPECTS. Costs against the petitioner. SO ORDERED. Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 178759 August 11, 2008

CHEVRON PHILIPPINES, INC., petitioner, vs. COMMISSIONER OF THE BUREAU OF CUSTOMS, respondent. DECISION CORONA, J.: This is a petition for review on certiorari of the decision and resolution of the Court of Tax Appeals (CTA) en banc dated March 1, 2007 and July 5, 2007, respectively, in CTA EB Nos. 121 and 122 which reversed the decision of the CTA First Division dated April 5, 2005 in CTA Case No. 6358. Petitioner Chevron Philippines, Inc. is engaged in the business of importing, distributing and marketing of petroleum products in the Philippines. In 1996, the importations subject of this case arrived and were covered by eight bills of lading, summarized as follows: PRODUCT 66,229,960 liters Nan Hai Crude Oil 6,990,712 liters Reformate 16,651,177 liters ARRIVAL DATE 3/8/1996 3/18/1996 3/21/1996 VESSEL Ex MT Bona Spray Ex MT Orient Tiger Ex MT
4 1 2 3

FCCU Feed Stock 236,317,862 liters Oman/Dubai Crude Oil 51,878,114 liters Arab Crude Oil 4/10/1996 3/26/1996

Probo Boaning Ex MT Violet Ex MT Crown Jewel

5

The shipments were unloaded from the carrying vessels onto petitioners oil tanks over a period of three days from the date of their arrival. Subsequently, the import entry declarations (IEDs) were filed and 90% of the total customs duties were paid. The import entry and internal revenue declarations (IEIRDs) of the shipments were thereafter filed on the following dates: ENTRY NO. 606-96 PRODUCT ARRIVAL DATE 3/8/1996 IED IEIRD

66,229,960 liters Nan Hai Crude Oil 6,990,712 liters Reformate 16,651,177 liters FCCU Feed Stock 236,317,862 liters Oman/Dubai Crude Oil

3/12/1996

5/10/1996

604-96

3/18/1996

3/26/1996

5/10/1996

605-96

3/21/1996

3/26/1996

5/10/1996

600-96 601-96 602-96 603-96 818-96

3/26/1996

3/28/1996

5/10/1996

51,878,114 liters Arab Crude Oil

4/10/1996

4/10/1996

6/21/1996

The importations were appraised at a duty rate of 3% as provided under RA 8180 and petitioner paid the 7 import duties amounting to P316,499,021. Prior to the effectivity of RA 8180 on April 16, 1996, the rate of duty on imported crude oil was 10%. Three years later, then Finance Secretary Edgardo Espiritu received a letter (with annexes) dated June 10, 1999 from a certain Alfonso A. Orioste denouncing the deliberate concealment, manipulation and scheme employed by petitioner and Pilipinas Shell in the importation of crude oil, thereby resulting in huge losses of revenue for the government. This letter was endorsed to the Bureau of Customs (BOC) for 8 investigation on July 19, 1999. On January 28, 2000, petitioner received a subpoena duces tecum/ad testificandum from Conrado M. Unlayao, Chief of the Investigation and Prosecution Division, Customs Intelligence and Investigation Service (IPD-CIIS) of the BOC, to submit pertinent documents in connection with the subject shipments pursuant to the investigation he was conducting thereon. It appeared, however, that the Legal Division of

the BOC was also carrying out a separate investigation. Atty. Roberto Madrid (of the latter office) had gone to petitioners Batangas Refinery and requested the submission of information and documents on the same shipments. This prompted petitioner to seek the creation of a unified team to exclusively handle 9 the investigation. On August 1, 2000, petitioner received from the District Collector of Customs of the Port of Batangas (District Collector) a demand letter requiring the immediate settlement of the amount of P73,535,830 representing the difference between the 10% and 3% tariff rates on the shipments. In response, petitioner wrote the District Collector to inform him of the pending request for the creation of a unified team with the exclusive authority to investigate the matter. Furthermore, petitioner objected to the demand for payment of customs duties using the 10% duty rate and reiterated its position that the 3% tariff rate should instead be applied. It likewise raised the defense of prescription against the assessment pursuant to Section 1603 of the Tariff and Customs Code (TCC). Thus, it prayed that the assessment for deficiency customs duties 10 be cancelled and the notice of demand be withdrawn. In a letter petitioner received on October 12, 2000, respondent Commissioner of the BOC stated that it was the IPD-CIIS which was authorized to handle the investigation, to the exclusion of the Legal Division 12 and the District Collector. The IPD-CIIS, through Special Investigator II Domingo B. Almeda and Special Investigator III Nemesio C. Magno, Jr., issued a finding dated February 2, 2001 that the import entries were filed beyond the 30-day non-extendible period prescribed under Section 1301 of the TCC. They concluded that the importations were already considered abandoned in favor of the government. They also found that fraud was 13 committed by petitioner in collusion with the former District Collector. Thereafter, respondent wrote petitioner on October 29, 2001 informing it of the findings of irregularity in the filing and acceptance of the import entries beyond the period required by customs law and in the release of the shipments after the same had already been deemed abandoned in favor of the government. Petitioner was ordered to pay the amount of P1,180,170,769.21 representing the total 15 dutiable value of the importations. This prompted petitioner to file a petition for review in the CTA First Division on November 28, 2001, 16 asking for the reversal of the decision of respondent. In a decision promulgated on April 5, 2005, the CTA First Division ruled that respondent was correct when he affirmed the findings of the IPD-CIIS on the existence of fraud. Therefore, prescription was not applicable. Ironically, however, it also held that petitioner did not abandon the shipments. The shipments should be subject to the 10% rate prevailing at the time of their withdrawal from the custody of the BOC pursuant to Sections 204, 205 and 1408 of the TCC. Petitioner was therefore liable for deficiency customs 17 duties in the amount of P105,899,569.05. Petitioner sought reconsideration of the April 5, 2005 decision while respondent likewise filed his motion 18 for partial reconsideration. Both motions were denied in a resolution dated September 9, 2005. After both respondent and petitioner had filed their petitions for review with the CTA en banc, docketed as CTA EB No. 121 and CTA EB No. 122, respectively, the petitions were consolidated. In a decision dated March 1, 2007, the CTA en banc held that it was the filing of the IEIRDs that constituted entry under the TCC. Since these were filed beyond the 30-day period, they were not seasonably "entered" in accordance with Section 1301 in relation to Section 205 of the TCC. Consequently, they were deemed abandoned under Sections 1801 and 1802 of the TCC. It also ruled that the notice required under Customs Memorandum Order No. 15-94 (CMO 15-94) was not necessary in view of petitioners actual knowledge of the arrival of the shipments. It likewise agreed with the CTA Divisions finding that petitioner committed fraud when it failed to file the IEIRD within the 30-day period
14 11

with the intent to "evade the higher rate." Thus, petitioner was ordered to pay respondent the total 19 dutiable value of the oil shipments amounting to P893,781,768.21. Hence this petition. There are three issues for our resolution: 1. whether "entry" under Section 1301 in relation to Section 1801 of the TCC refers to the IED or the IEIRD; 2. whether fraud was perpetrated by petitioner and 3. whether the importations can be considered abandoned under Section 1801. "ENTRY" IN SECTIONS 1301 AND 1801 OF THE TCC REFERS TO BOTH THE IED AND IEIRD Under Section 1301 of the TCC, imported articles must be entered within a non-extendible period of 30 days from the date of discharge of the last package from a vessel. Otherwise, the BOC will deem the imported goods impliedly abandoned under Section 1801. Thus: Section 1301. Persons Authorized to Make Import Entry. - Imported articles must be entered in the customhouse at the port of entry within thirty (30) days, which shall not be extendible from date of discharge of the last package from the vessel or aircraft either (a) by the importer, being holder of the bill of lading, (b) by a duly licensed customs broker acting under authority from a holder of the bill or (c) by a person duly empowered to act as agent or attorneyin-fact for each holder: Provided, That where the entry is filed by a party other than the importer, said importer shall himself be required to declare under oath and under the penalties of falsification or perjury that the declarations and statements contained in the entry are true and correct: Provided, further, That such statements under oath shall constitute prima facie evidence of knowledge and consent of the importer of violation against applicable provisions of this Code when the importation is found to be unlawful. (Emphasis supplied) Section 1801. Abandonment, Kinds and Effect of. - An imported article is deemed abandonedunder any of the following circumstances: xxx xxx xxx b. When the owner, importer, consignee or interested party after due notice, fails to file an entry within thirty (30) days, which shall not be extendible, from the date of discharge of the last package from the vessel or aircraft, or having filed such entry, fails to claim his importation within fifteen (15) days, which shall not likewise be extendible, from the date of posting of the notice to claim such importation. (Emphasis supplied) Petitioner argues that the IED is an entry contemplated by these sections. According to it, the congressional deliberations on RA 7651 which amended the TCC to provide a non-extendible 30-day period show the legislative intent to expedite the procedure for declaring importations as abandoned. Filing an entry serves as notice to the BOC of the importers willingness to complete the importation and to pay the proper taxes, duties and fees. Conversely, the non-filing of the entry within the period connotes the importers disinterest and enables the BOC to consider the goods as abandoned. Since the IED is a BOC form that serves as basis for payment of advance duties on importation as required under PD 20 21 1853, it suffices as an entry under Sections 1301 and 1801 of the TCC.

We disagree. The term "entry" in customs law has a triple meaning. It means (1) the documents filed at the customs house; (2) the submission and acceptance of the documents and (3) the procedure of passing goods 22 through the customs house. The IED serves as basis for the payment of advance duties on importations whereas the IEIRD evidences the final payment of duties and taxes. The question is: was the filing of the IED sufficient to constitute "entry" under the TCC? The law itself, in Section 205, defines the meaning of the technical term "entered" as used in the TCC: Section 205. Entry, or Withdrawal from Warehouse, for Consumption. - Imported articles shall be deemed "entered" in the Philippines for consumption when the specified entry form is properly filed and accepted, together with any related documents regained by the provisions of this Code and/or regulations to be filed with such form at the time of entry, at the port or station by the customs official designated to receive such entry papers and any duties, taxes, fees and/or other lawful charges required to be paid at the time of making such entry have been paid or secured to be paid with the customs official designated to receive such monies, provided that the article has previously arrived within the limits of the port of entry. xxx xxx xxx (Emphasis supplied) Clearly, the operative act that constitutes "entry" of the imported articles at the port of entry is the filing and acceptance of the "specified entry form" together with the other documents required by law and regulations. There is no dispute that the "specified entry form" refers to the IEIRD. Section 205 defines the precise moment when the imported articles are deemed "entered." Moreover, in the old case of Go Ho Lim v. The Insular Collector of Customs, we ruled that the word "entry" refers to the regular consumption entry (which, in our current terminology, is the IEIRD) and not the provisional entry (the IED): It is disputed by the parties whether the application for the special permit. Exhibit A, containing the misdeclared weight of the 800 cases of eggs, comes within the meaning of the word "entry" used in section 1290 of the Revised Administrative Code, or said word "entry" means only the "original entry and importer's declaration." The court below reversed the decision of the Insular Collector of Customs on the ground that the provisions of section 1290 of the Revised Administrative Code refer to the regular consumption entry and not to a provisional declaration made in an application for a special permit, as the one filed by the appellee, to remove the cases of eggs from the customhouse. This court is of the opinion that certainly the application, Exhibit A, cannot be considered as a final regular entry of the weight of the 800 cases of eggs imported by the appellee, taking into account the fact that said application sought the delivery of said 800 cases of eggs "from the pier after examination," and the special permit granted, Exhibit E, provided for "delivery to be made after examination by the appraiser." All the foregoing, together with the circumstance that the appellee had to file the regular consumption entry which he bound himself to do, as shown by the application, Exhibit A, logically lead to the conclusion that the declaration of the weight of the 800 cases of eggs made in said application, is merely a provisional entry, and as it is subject to verification by the customhouse examiner, it cannot be considered fraudulent for the purpose of 24 imposing a surcharge of customs duties upon the importer. (Emphasis supplied)
23

The congressional deliberations on House Bill No. 4502 which was enacted as RA 7651 amending the TCC lay down the policy considerations for the non-extendible 30-day period for the filing of the import entry in Section 1301: MR. JAVIER (E.). xxx xxx xxx Under Sections 1210 and 1301 of the [TCC], Mr. Speaker, import entries for imported articles must be filed within five days from the date of discharge of the last package from the vessel. The five-day period, however, Mr. Speaker, is subject to an indefinite extension at the discretion of the collector of customs, which more often than not stretches to more than three months, thusresulting in considerable delay in the payment of duties and taxes. This bill, Mr. Speaker, seeks to amend Sections 1210 and 1301 by extending the five-day period to thirty days, which will no longer be extendible, within which import entries must be filed for imported articles. Moreover, to give the importer reasonable time, the bill prescribes a period of fifteen days which may not be extended within which to claim his importation from the time he filed the import entry. Failure to file an import entry or to claim the imported articles within the period prescribed under the proposed measure, such imported articles will be treated as abandoned and declared as ipso facto the property of the government to be sold at public auction. Under this new procedure, Mr. Speaker, importers will be constrained under the threat of having their importation declared as abandoned and forfeited in favor of the government to file import entries and claim their importation as early as possible thus accelerating the collection of duties and taxes. But providing for a non-extendible period of 30 days within which to file an import entry, an appeal of fifteen days within which to claim the imported article, the bill has removed the discretion of the collector of Customs to extend such period thus minimizing opportunity for graft. Moreover, Mr. Speaker, with these non-extendible periods coupled with the threat of declaration of abandonment of imported articles, both the [BOC] and the importer are under pressure to work for the early release of cargo, thus decongesting all ports of entry and facilitating the release of goods and thereby promoting trade and commerce. Finally, Mr. Speaker, the speedy release of imported cargo coupled with the sanctions of declaration of abandonment and forfeiture will minimize the pilferage of imported cargo at the 27 ports of entry. (Emphasis supplied) The filing of the IEIRDs has several important purposes: to ascertain the value of the imported articles, collect the correct and final amount of customs duties and avoid smuggling of goods into the 28 country. Petitioners interpretation would have an absurd implication: the 30-day period applies only to the IED while no deadline is specified for the submission of the IEIRD. Strong issues of public policy militate against petitioners interpretation. It is the IEIRD which accompanies the final payment of duties and taxes. These duties and taxes must be paid in full before the BOC can allow the release of the imported articles from its custody. Taxes are the lifeblood of the nation. Tariff and customs duties are taxes constituting a significant portion of the public revenue which enables the government to carry out the functions it has been ordained to 29 perform for the welfare of its constituents. Hence, their prompt and certain availability is an imperative 30 31 need and they must be collected without unnecessary hindrance. Clearly, and perhaps for that reason alone, the submission of the IEIRD cannot be left to the exclusive discretion or whim of the importer. We hold, therefore, that under the relevant provisions of the TCC, both the IED and IEIRD should be filed within 30 days from the date of discharge of the last package from the vessel or aircraft. As a result,
32 26

25

the position of petitioner, that the import entry to be filed within the 30-day period refers to the IED and not the IEIRD, has no legal basis. THE EXISTENCE OF FRAUD WAS ESTABLISHED Petitioner also denies the commission of fraud. It maintains that it had no predetermined and deliberate intention not to comply with the 30-day period in order to evade the payment of the 10% rate of duty. Its sole reason for the delayed filing of IEIRDs was allegedly due to the late arrival of the original copies of the bills of lading and commercial invoices which its suppliers could send only after the latter computed the average monthly price of crude oil based on worldwide trading. It claims that the BOC required these original documents to be attached to the IEIRD. Petitioners arguments lack merit. Fraud, in its general sense, "is deemed to comprise anything calculated to deceive, including all acts, omissions, and concealment involving a breach of legal or equitable duty, trust or confidence justly reposed, resulting in the damage to another, or by which an undue and unconscionable advantage is 33 taken of another." It is a question of fact and the circumstances constituting it must be alleged and 34 proved in the court below. The finding of the lower court as to the existence or non-existence of fraud is 35 final and cannot be reviewed here unless clearly shown to be erroneous. In this case, fraud was established by the IPD-CIIS of the BOC. Both the CTA First Division and en banc agreed completely with this finding. The evidence showed that petitioner bided its time to file the IEIRD so as to avail of a lower rate of duty. (At or about the time these developments were taking place, the bill lowering the duty on these oil products from 10% to 3% was already under intense discussion in Congress.) There was a calculated and preconceived course of action adopted by petitioner purposely to evade the payment of the correct customs duties then prevailing. This was done in collusion with the former District Collector, who allowed the acceptance of the late IEIRDs and the collection of duties using the 3% declared rate. A clear indication of petitioners deliberate intention to defraud the government was its non -disclosure of 36 discrepancies on the duties declared in the IEDs (10%) and IEIRDs (3%) covering the shipments. It was not by sheer coincidence that, by the time petitioner filed its IEIRDs way beyond the mandated period, the rate of duty had already been reduced from 10% to 3%. Both the CTA Division and en bancfound the explanation of petitioner (for its delay in filing) untruthful. The bills of lading and corresponding invoices covering the shipments were accomplished immediately after loading onto the 37 vessels. Notably, the memorandum of a district collector cited by petitioner as basis for its assertion that 38 original copies were required by the BOC was dated October 30, 2002. There is no showing that in 1996, the time pertinent in this case, this was in fact a requirement. More importantly, the absence of supporting documents should not have prevented petitioner from complying with the mandatory and non-extendible period, specially since the consequences of delayed filing were extremely serious. In addition, these supporting documents were not conclusive on the 39 government. If this kind of excuse were to be accepted, then the collection of customs duties would be at the mercy of importers. Hence, due to the presence of fraud, the prescriptive period of the finality of liquidation under Section 1603 was inapplicable: Section 1603. Finality of Liquidation. When articles have been entered and passed free of duty or final adjustments of duties made, with subsequent delivery, such entry and passage free of duty or settlements of duties will, after the expiration of one (1) year, from the date of the final payment of duties, in the absence of fraud or protest or compliance audit pursuant to the

provisions of this Code, be final and conclusive upon all parties, unless the liquidation of the 40 import entry was merely tentative. THE IMPORTATIONS WERE ABANDONED IN FAVOR OF THE GOVERNMENT The law is clear and explicit. It gives a non-extendible period of 30 days for the importer to file the entry which we have already ruled pertains to both the IED and IEIRD. Thus under Section 1801 in relation to Section 1301, when the importer fails to file the entry within the said period, he "shall be deemed to have renounced all his interests and property rights" to the importations and these shall be considered impliedly abandoned in favor of the government: Section 1801. Abandonment, Kinds and Effect of. xxx xxx xxx Any person who abandons an article or who fails to claim his importation as provided for in the preceding paragraph shall be deemed to have renounced all his interests and property rights therein. According to petitioner, the shipments should not be considered impliedly abandoned because none of its overt acts (filing of the IEDs and paying advance duties) revealed any intention to abandon the 41 importations. Unfortunately for petitioner, it was the law itself which considered the importation abandoned when it failed to file the IEIRDs within the allotted time. Before it was amended, Section 1801 was worded as follows: Sec. 1801. Abandonment, Kinds and Effect of. Abandonment is express when it is made direct to the Collector by the interested party in writing and it is implied when, from the action or omission of the interested party, an intention to abandon can be clearly inferred. The failure of any interested party to file the import entry within fifteen days or any extension thereof from the discharge of the vessel or aircraft, shall be implied abandonment. An implied abandonment shall not be effective until the article is declared by the Collector to have been abandoned after notice thereof is given to the interested party as in seizure cases. Any person who abandons an imported article renounces all his interests and property rights 42 therein. After it was amended by RA 7651, there was an indubitable shift in language as to what could be considered implied abandonment: Section 1801. Abandonment, Kinds and Effect of. - An imported article is deemed abandonedunder any of the following circumstances: a. When the owner, importer, consignee of the imported article expressly signifies in writing to the Collector of Customs his intention to abandon; or b. When the owner, importer, consignee or interested party after due notice, fails to file an entry within thirty (30) days, which shall not be extendible, from the date of discharge of the last package from the vessel or aircraft xxxx

From the wording of the amendment, RA 7651 no longer requires that there be other acts or omissions where an intent to abandon can be inferred. It is enough that the importer fails to file the required import entries within the reglementary period. The lawmakers could have easily retained the words used in the 43 old law (with respect to the intention to abandon) but opted to omit them. It would be error on our part to continue applying the old law despite the clear changes introduced by the amendment. NOTICE WAS NOT NECESSARY UNDER THE CIRCUMSTANCES OF THIS CASE Petitioner also avers that the importations could not be deemed impliedly abandoned because respondent did not give it any notice as required by Section 1801 of the TCC: Sec. 1801. Abandonment, Kinds and Effect of. - An imported article is deemed abandoned under any of the following circumstances: xxx xxx xxx b. When the owner, importer, consignee or interested party after due notice, fails to file an entry within thirty (30) days, which shall not be extendible, from the date of discharge of the last package from the vessel or aircraft xxx (Emphasis supplied) Furthermore, it claims that notice and abandonment proceedings were required under the BOCs guidelines on abandonment (CMO 15-94): SUBJECT: REVISED GUIDELINES ON ABANDONMENT xxx xxx xxx B. ADMINISTRATIVE PROVISIONS xxx xxx xxx B.2 Implied abandonment occurs when: B.2.1 The owner, importer, consignee, interested party or his authorized broker/representative, after due notice, fails to file an entry within a non-extendible period of thirty (30) days from the date of discharge of last package from the carrying vessel or aircraft. xxx xxx xxx Due notice to the consignee/importer/owner/interested party shall be by means of posting of a notice to file entry at the Bulletin Board seven (7) days prior to the lapse of the thirty (30) day period by the Entry Processing Division listing the consignees who/which have not filed the required import entries as of the date of the posting of the notice and notifying them of the arrival of their shipment, the name of the carrying vessel/aircraft, Voy. No. Reg. No. and the respective B/L No./AWB No., with a warning, as shown by the attached form, entitled: "URGENT NOTICE TO FILE ENTRY" which is attached hereto as Annex A and made an integral part of this Order. xxx xxx xxx C. OPERATIONAL PROVISIONS

xxx xxx xxx C.2 On Implied Abandonment: C.2.1 When no entry is filed C.2.1.1 Within twenty-four (24) hours after the completion of the boarding formalities, the Boarding Inspector must submit the manifests to the Bay Service or similar office so that the Entry Processing Division copy may be put to use by said office as soon as possible. C..2.1.2 Within twenty-four (24) hours after the completion of the unloading of the vessel/aircraft, the Inspector assigned in the vessel/aircraft, shall issue a certificationaddressed to the Collector of Customs (Attention: Chief, Entry Processing Division), copy furnished Chief, Data Monitoring Unit, specifically stating the time and date of discharge of the last package from the vessel/aircraft assigned to him. Said certificate must be encoded by Data Monitoring Unit in the Manifest Clearance System. C.2.1.3 Twenty-three (23) days after the discharge of the last package from the carrying vessel/aircraft, the Chief, Data Monitoring Unit shall cause the printing of theURGENT NOTICE TO FILE ENTRY in accordance with the attached form, Annex A hereof, sign the URGENT NOTICE and cause its posting continuously for seven (7) days at the Bulletin Board for the purpose until the lapse of the thirty (30) day period. C.2.1.4 The Chief, Data Monitoring Unit, shall submit a weekly report to the Collector of Customs with a listing by vessel, Registry Number of shipments/ importations which shall be deemed abandoned for failure to file entry within the prescribed period and with certificationthat per records available, the thirty (30) day period within which to file the entry therefore has lapsed without the consignee/importer filing the entry and that the proper posting of notice as required has been complied with. xxx xxx xxx C.2.1.5 Upon receipt of the report, the Collector of Customs shall issue an order to the Chief, Auction and Cargo Disposal Division, to dispose of the shipment enumerated in the report prepared by the Chief, Data Monitoring Unit on the ground that those are abandoned and ipso facto deemed the property of the Government to be disposed of as provided by law. xxx xxx xxx We disagree. Under the peculiar facts and circumstances of this case, due notice was not necessary. The shipments arrived in 1996. The IEDs and IEIRDs were also filed in 1996. However, respondent discovered the fraud which attended the importations and their subsequent release from the BOCs custody only in 1999. Obviously, the situation here was not an ordinary case of abandonment wherein the importer merely decided not to claim its importations. Fraud was established against petitioner; it colluded with the former District Collector. Because of this, the scheme was concealed from respondent. The government was unable to protect itself until the plot was uncovered. The government cannot be crippled by the malfeasance of its officials and employees. Consequently, it was impossible for respondent to comply with the requirements under the rules.
44

(Emphasis supplied)

By the time respondent learned of the anomaly, the entries had already been belatedly filed and the oil importations released and presumably used or sold. It was a fait accompli. Under such circumstances, it would have been against all logic to require respondent to still post an "urgent notice to file entry" before declaring the shipments abandoned. The minutes of the deliberations in the House of Representatives Committee on Ways and Means on the proposed amendment to Section 1801 of the TCC show that the phrase "after due notice" was intended for owners, consignees, importers of the shipments who live in rural areas or distant places far from the port where the shipments are discharged, who are unfamiliar with customs procedures and need the help and advice of people on how to file an entry: xxxxxxxxx MR. FERIA. 1801, your Honor. The question that was raised here in the last hearing was whether notice is required to be sent to the importer. And, it has been brought forward that we can dispense with the notice to the importer because the shipping companies are notifying the importers on the arrival of their shipment. And, so that notice is sufficient to . . . sufficient for the claimant or importer to know that the shipments have already arrived. Second, your Honor, the legitimate businessmen always have . . . they have their agents with the shipping companies, and so they should know the arrival of their shipment. xxx xxx xxx HON. QUIMPO. Okay. Comparing the two, Mr. Chairman, I cannot help but notice that in the substitution now there is a failure to provide the phrase AFTER NOTICE THEREOF IS GIVEN TO THE INTERESTED PARTY, which was in the original. Now in the second, in the substitution, it has been deleted. I was first wondering whether this would be necessary in order to provide for due process. Im thinking of certain cases, Mr. Chairman, where the owner might not have known. This is now on implied abandonment not the express abandonment. xxx xxx xxx HON. QUIMPO. Because Im thinking, Mr. Chairman. Im thinking of certain situations where the importer even though, you know, in the normal course of business sometimes they fail to keep up the date or something to that effect. THE CHAIRMAN. Sometimes their cargoes get lost. HON. QUIMPO. So just to, you know . . . anyway, this is only a notice to be sent to them that they have a cargo there. xxx xxx xxx MR. PARAYNO. Your Honor, I think as a general rule, five days [extendible] to another five days is a good enough period of time. But we cannot discount that there are some consignees of shipments located in rural areas or distant from urban centers where the ports are located to come to the [BOC] and to ask for help particularly if a ship consignment is made to an individual who is uninitiated with customs procedures. He will probably have the problem of coming over to the urban centers, seek the advice of people on how to file entry. And therefore, the five day extendible to another five days might really be a tight period for some. But the majority of our importers are knowledgeable of procedures. And in fact, it is in their interest to file the entry even before the arrival of the s hipment. Thats why we have a

procedure in the bureau whereby importers can file their entries even before the shipment arrives 45 in the country. (Emphasis supplied) xxxxxxxxx Petitioner, a regular, large-scale and multinational importer of oil and oil products, fell under the category of a knowledgeable importer which was familiar with the governing rules and procedures in the release of importations. Furthermore, notice to petitioner was unnecessary because it was fully aware that its shipments had in fact arrived in the Port of Batangas. The oil shipments were discharged from the carriers docked in its private pier or wharf, into its shore tanks. From then on, petitioner had actual physical possession of its oil importations. It was thus incumbent upon it to know its obligation to file the IEIRD within the 30-day period prescribed by law. As a matter of fact, importers such as petitioner can, under existing rules and regulations, file in advance an import entry even before the arrival of the shipment to expedite the release of the same. However, it deliberately chose not to comply with its obligation under Section 1301. The purpose of posting an "urgent notice to file entry" pursuant to Section B.2.1 of CMO 15-94 is only to notify the importer of the "arrival of its shipment" and the details of said shipment. Since it already had knowledge of such, notice was superfluous. Besides, the entries had already been filed, albeit belatedly. It would have been oppressive to the government to demand a literal implementation of this notice requirement. AN ABANDONED ARTICLE SHALL IPSO FACTO BE DEEMED THE PROPERTY OF THE GOVERNMENT Section 1802 of the TCC provides: Sec. 1802. Abandonment of Imported Articles. - An abandoned article shall ipso facto be deemed the property of the Government and shall be disposed of in accordance with the provisions of this Code. (Emphasis supplied) The term "ipso facto" is defined as "by the very act itself" or "by mere act." Probably a closer translation of 46 the Latin term would be "by the fact itself." Thus, there was no need for any affirmative act on the part of the government with respect to the abandoned imported articles since the law itself provides that the abandoned articles shall ipso facto be deemed the property of the government. Ownership over the abandoned importation was transferred to the government by operation of law under Section 1802 of the TCC, as amended by RA 7651. A historical review of the pertinent provisions of the TCC dispels any view that is contrary to the automatic transfer of ownership of the abandoned articles to the government by the mere fact of an importers failure to file the required entries within the mandated period. Under the former Administrative Code, Act 2711,
47

Section 1323 of Article XV thereof provides:

Sec. 1323. When implied abandonment takes effect Notice An implied abandonment shall not take effect until after the property shall be declared by the collector to have been abandoned and notice to the party in interest as in seizure cases. Thereafter, RA 1937
48

was enacted. Section 1801 thereof provides:

Sec. 1801. Abandonment, Kinds and Effect of. Abandonment is express when it is made direct to the Collector by the interested party in writing and it is implied when, from the action or

omission of the interested party, an intention to abandon can be clearly inferred. The failure of any interested party to file the import entry within fifteen days or any extension thereof from the discharge of the vessel or aircraft, shall be implied abandonment. An implied abandonment shall not be effective until the article is declared by the Collector to have been abandoned after notice thereof is given to the interested party as in seizure cases. Any person who abandons an imported article renounces all his interests and property rights therein. PD 1464 did not amend the provisions of the TCC on abandonment. The latest amendment was introduced by Section 1802 of RA 7651 which provides: Sec. 1802. Abandonment of Imported Articles. An abandoned article shall ipso facto be deemed the property of the Government and shall be disposed of in accordance with the provisions of this Code. The amendatory law, RA 7651, deleted the requirement that there must be a declaration by the Collector of Customs that the goods have been abandoned by the importers and that the latter shall be given notice of said declaration before any abandonment of the articles becomes effective. No doubt, by using the term "ipso facto" in Section 1802 as amended by RA 7651, the legislature removed the need for abandonment proceedings and for a declaration that the imported articles have 50 been abandoned before ownership thereof can be transferred to the government. Petitioner claims it is arbitrary, harsh and confiscatory to deprive importers of their property rights just because of their failure to timely file the IEIRD. In effect, petitioner is challenging the constitutionality of Sections 1801 and 1802 by contending that said provisions are violative of substantive and procedural due process. We disallow this collateral attack on a presumably valid law: We have ruled time and again that the constitutionality or validity of laws, orders, or such other rules with the force of law cannot be attacked collaterally. There is a legal presumption of validity of these laws and rules. Unless a law or rule is annulled in a direct proceeding, the legal 51 presumption of its validity stands. Besides, [a] law is deemed valid unless declared null and void by a competent court; more so when the issue has not been duly pleaded in the trial court. The question of constitutionality must be raised at the earliest opportunity. xxx The settled rule is that courts will not anticipate a question of 52 constitutional law in advance of the necessity of deciding it. Be that as it may, the intent of Congress was unequivocal. Our policy makers wanted to do away with lengthy proceedings before an importation can be considered abandoned: x x x x x x xxx MR. PARAYNO. Thank you, Mr. Chairman. The proposed amendment to Section 1801 on the abandonment, kinds and effects. This aimed to facilitate, Mr. Chairman, the process by which this activity is being acted upon at the moment. The intention, Mr. Chairman, is for the Customs Administration to be able to maximize the revenue that can be derived from abandoned goods, and the problem that we are encountering at the moment is that we have to go through a lengthy process similar to a seizure proceedings to be able to finally declare the cargo, the abandoned cargo forfeited in favor of the government and therefore, may be disposed of pursuant to law. And
49

that therefore, the proposed amendment particularly on the implied abandonment as framed here will do away with the lengthy process of seizure proceedings and therefore, enable us to dispose of the shipments through public auction and other modes of disposal as early as possible. THE CHAIRMAN. In other words, Commissioner, therell be no need for a seizure in the case of abandonment because under the proposed bill its considered to be government 53 property. x x x xxx xxx CONCLUSION Petitioners failure to file the required entries within a non-extendible period of thirty days from date of discharge of the last package from the carrying vessel constituted implied abandonment of its oil importations. This means that from the precise moment that the non-extendible thirty-day period lapsed, the abandoned shipments were deemed (that is, they became) the property of the government. Therefore, when petitioner withdrew the oil shipments for consumption, it appropriated for itself properties which already belonged to the government. Accordingly, it became liable for the total dutiable value of the shipments of imported crude oil amounting to P1,210,280,789.21 reduced by the total amount of duties paid amounting to P316,499,021.00 thereby leaving a balance of P893,781,768.21. By the very nature of its functions, the CTA is a highly specialized court specifically created for the purpose of reviewing tax and customs cases. It is dedicated exclusively to the study and consideration of revenue-related problems and has necessarily developed an expertise on the subject. Thus, as a general rule, its findings and conclusions are accorded great respect and are generally upheld by this Court, unless there is a clear showing of a reversible error or an improvident exercise of authority. There is no such showing here. WHEREFORE, the petition is hereby DENIED. Petitioner Chevron Philippines, Inc. is ORDERED to paythe amount of EIGHT HUNDRED NINETY THREE MILLION SEVEN HUNDRED EIGHTY ONE THOUSAND SEVEN HUNDRED SIXTY EIGHT PESOS AND TWENTY-ONE CENTAVOS (P893,781,768.21) plus six percent (6%) legal interest per annum accruing from the date of promulgation of this decision until its finality. Upon finality of this decision, the sum so awarded shall bear interest at the rate of twelve percent (12%) per annum until its full satisfaction.

epublic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-31733 September 20, 1985 COMMISSIONER OF CUSTOMS, petitioner, vs. COURT OF TAX APPEALS and JOSE PASCUAL, respondents,

MAKASIAR, J.: This is a petition for review on certiorari of the decision dated September 30, 1969 of respondent Court of Tax Appeals which modified the decision of petitioner Commissioner of Customs by ordering only the payment of a fire in lieu of the forfeiture of private respondent Jose Pascual's vessel M/B "Maria Victoria-P", used in the illegal importation of blue seal cigarettes. Private respondent Jose Pascual is the registered owner of the M/B "Maria Victoria-P", a motor boat of 63.25 gross tonnage duly licensed by the Bureau of Customs to engage in coastwise trade. On December 16, 1963, the said vessel was apprehended by the elements of the Philippine Navy five miles off the coast of Naic, Cavite for carrying untaxed 105 cases and 90 parks of Salem cigarettes and 414 cases of Union cigarettes. The authorities turned over the vessel, its crew and its cargo of blue seal cigarettes to the Small Craft Unit of the Philippine Navy for disposition. Thereafter, Seizure Identification Case Nos. 8006 and 8006-A against the vessel and the cargo of blue seal cigarettes, respectively, were instituted before the Collector of Customs. For failure of anybody to claim ownership over the cigarettes, the same were forfeited in favor of the Government. On the other hand, during the forfeiture proceedings against the vessel private respondent claimed that on December 4, 1963, his vessel with fourteen (14) crew and a captain went to Bulalakao, Mindoro to catch fish; that after three days of fishing, all the fishing nets were destroyed; that Jose Joloc captain of the boat, notified private respondent in Manila about the nets and the latter ordered the former to bring the boat back to Manila; that for failure of the boat to arrive in Manila on the date expected by private respondent, he sent a telegram addressed to the captain reiterating his previous order, but no answer was received; that private respondent sent a certain Artemio Buenvenuto to Mindoro on December 13, 1963 to fetch the boat; that on even date Buenvenuto sent a telegram to private respondent that the boat had left Mindoro; that after receiving the telegram on the same date, private respondent notified the Philippine Navy that his boat was missing and expressed fear that it might be used illegally. Jose Joloc captain of the vessel claimed that he was not able to bring the boat back to Manila due to bad weather; that while in Mindoro, Fructuoso Maniego, whom he knew since 1962 approached and asked him if he could load the former's fishes on board M/B "Maria Victoria-P" for a fee of P20,000.00; that the fishes were out in the sea aboard a disabled boat; that he agreed and upon reaching the place where the boatload of fishes is located, they found a kumpit with seven armed Muslims on board and that the kumpit was loaded with blue seal cigarettes; that at gun points, he was forced to load the blue seal cigarettes which allegedly belong to one Datu Jacob of Jolo, Sulo.

On July 3, 1964, the Collector of Customs rendered a decision declaring the vessel forfeited in favor of the Government. The Collector of Customs ruled that since it was established that the vessel was hired for a fee of P20,000.00 thru its captain, to ferry the untaxed cigarettes, there was a contract of carriage entered into between Jose Joloc and the owner of the cigarettes; that Jose Pascual, owner of the vessel is bound by the acts of his agent, On appeal by herein private respondent, the decision was affirmed by the Commissioner of Customs. Private respondent appealed before the Court of Tax Appeals and on September 30, 1969, the said Court, as already stated, modified the decision of the Commissioner of Customs and ordered private respondent to pay a fine of P5,000.00 instead of the forfeiture of the vessel. Respondent Court stated that there is no question that the vessel was used in the illegal importation of blue seal cigarettes; hence, subject to penalty imposed by Section 2530 of the Tariff and Customs Code. However, the penalty of forfeiture appears to be excessive since herein private respondent took all the necessary action to prevent the vessel from being used illegally by notifying the Philippine Navy of the disappearance of the vessel. From the aforesaid decision, petitioner instituted the present petition. The imperative question presented to Us in this appeal is whether or not the motor boat M/B "Maria Victoria-P" is subject to forfeiture under the Tariff and Customs Code, particularly paragraphs (a) and (b) of Section 2530. After the petition was given due course, private respondent in his answer stated that during the pendency of the case before the Court of Appeals, the vessel M/B "Maria Victoria-P" was sold at public auction by the Auction and Sales Division of the Bureau of Customs. WE find merit in the petition. M/B "Maria Victoria-P" was a vessel duly authorized to engage in coastwise trade. It is undisputed and, in fact, established that it was used in the illegal importation of blue seal cigarettes. Thus, the law applicable is paragraphs (a) and (b), Section 2530 of the Tariff and Customs Code which states: SEC. 2530. Property Subject to Forfeiture Under Tariff and Customs Law.- Any vehicle, vessel or aircraft, cargo, article and other objects shall under the following conditions be subject to forfeiture a. Any vehicle, vessel or aircraft, including cargo, which shall be used unlawfully in the importation or exportation of articles or in conveying and or transporting contraband, or smuggled article in commercial quantities into or from any Philippine port or place, and any vessel which, being of less than thirty tons capacity shall be used in the importation of articles into any Philippine Port or place. The mere carrying or holding on board of contraband or smuggled articles in commercial quantities shall subject such vessel vehicle, aircraft or any other craft to forfeiture: Provided, That the vessel, vehicle, aircraft or any other craft is not used as a duly authorized common carrier and as such a carrier it is not chartered or leased; b. Any vessel engaging in the coastwise trade which shall have on board any article of foreign growth, produce, or manufacture in

excess of the amount necessary for sea stores, without such article having been properly entered or legally imported. Pursuant to the aforesaid provision, the vessel is clearly subject to forfeiture in favor of the Government. Forfeiture proceedings are in the nature of proceedings in rem (Vierneza vs. Commissioner of Customs, 24 SCRA 394) and are directed against the res. The fact that private respondent has allegedly no actual knowledge that M/B "Maria Victoria-P" was used illegally does not render the vessel immune from forfeiture. This is so because the forfeiture proceedings in this case was instituted against the vessel itself. Private respondent's defense that he has no actual knowledge that the vessel was used illegally is personal to him but cannot absolve the vessel from liability of forfeiture. Moreover, the aforequoted provision prescribes in an unequivocal term the imposition of the penalty of forfeiture in cases of unlawful importation of foreign articles regardless of whether such importation occurred with or without the knowledge of the owner of the vessel. In United States vs. Steamship "Rubi" (32 Phil. 239), this Court, in resolving the question of whether or not the innocence of the owner in the illegal importation of foreign articles can withdraw the ship from the penalty of confiscation, said: The vessel which commits the aggression is treated as the offender, without any reference whatsoever to the character or conduct of the owner. ... This is done from the necessity of the case, as the only adequate means of suppressing the offense or wrong. ... The doctrine also is familiarly applied to cases of smuggling and other misconduct under our revenue laws; and ... embargo and non-intercourse acts. ... The same thing applies to proceeding in rem or seizures in admiralty ... The acts of the master and crew, in cases of this sort, bind the interest of the owner of the ship, whether he be innocent or guilty. The claim of private respondent that while the crew members of the vessel were fishing, all the fishing nets were destroyed and that he was even notified in this regard is hardly convincing. It may be possible that while in the course of catching fish, one or two fishing nets may be destroyed. But the destruction of all the fishing nets at the same time is highly improbable. Furthermore, private respondent reported to the Philippine Navy instead of the Coast Guard that his vessel was missing, only after a lapse of six (6) days from the time he was informed of the alleged destruction of all the fishing nets. Could it be that all those notification of destruction of fishing nets and eventually of the loss of vessel are just a part of a scheme to prevent the vessel from any liability should, as it happened in this case, it be intercepted by the authorities? The insistence of Jose Joloc captain of the vessel that the boat could not be brought back to Manila due to bad weather is not supported by evidence. No weather report in Mindoro was ever presented during the hearing of the case. His insistence becomes even more dubious by the fact that he agreed with Fructuoso Maniego to load the latter's fishes on board M/B "Maria Victoria-P" when the alleged fishes were even out at sea aboard an alleged disabled boat. It is unbelievable that he could risk going out to sea to load the fish cargo of Maniego in the midst of the storm, but could not sail back to Manila. Taking all these circumstances, the conclusion is inevitable that the vessel was not used in catching fish but was used in the smuggling of blue seal cigarettes. WHEREFORE, THE QUESTIONED DECISION DATED SEPTEMBER 30, 1969 OF RESPONDENT COURT OF TAX APPEALS IS HEREBY SET ASIDE; AND THE VESSEL M/B "MARIA VICTORIA-

P" IS HEREBY ORDERED FORFEITED IN FAVOR OF THE GOVERNMENT. COSTS AGAINST PRIVATE RESPONDENT. SO ORDERED. Aquino (Chairman), Concepcion, Jr., Abad Santos, Escolin, Cuevas and Alampay, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 167278 February 27, 2008

ATTY. GIL A. VALERA, CPA-LCB, Deputy Commissioner, Revenue Collection Monitoring Group, Bureau of Customs, petitioner, vs. OFFICE OF THE OMBUDSMAN, rep. by Hon. ORLANDO C. CASIMIRO, Deputy Ombudsman for the and Military Other Law Enforcement Offices (MOLEO), in his capacity as Acting Ombudsman; PNP-CIDG, rep. by Director General Eduardo S. Matillano (public complainant); ATTY. ADOLFO CASARENO (private complainant); Hon. CESAR V. PURISIMA, Secretary of Finance, Department of Finance; Hon. ALBERTO D. LINA, Commissioner of Customs, Bureau of Customs; Hon. ROBERTO D. GEOTINA, Deputy Commissioner for Internal Administration Group, Bureau of Customs; and HONORABLE COURT OF APPEALS(Fourth Division), respondents. DECISION PUNO, C.J.: Public office is a public trust.1 Public officers and employees must at all times be accountable to the people, serve them with utmost responsibility, integrity, loyalty and efficiency, and act with patriotism and justice, and lead modest lives.2 With the numerous ills and negative perception surrounding the revenue collection agencies of the government, this mandate of our fundamental law becomes all the more relevant to the present petition. Petitioner, a Deputy Commissioner of the Bureau of Customs, seeks to reverse and set aside the Decision3 rendered by the Court of Appeals which affirmed the Decision4 of the Office of the Deputy Ombudsman for the Military and other Law Enforcement Offices (OMB-MOLEO) finding him guilty of grave misconduct, and decreeing his dismissal from the service with all the accessory penalties appertaining thereto. The records show that petitioner Gil A. Valera was appointed by President Gloria Macapagal Arroyo as Deputy Commissioner of Customs in charge of the Revenue Collection Monitoring Group on July 13, 2001. He took his oath of office on August 3, 2001, and assumed his post on August 7 of the same year. On December 21, 2001, he filed in the Regional Trial Court (RTC) of Manila, for and on behalf of the Bureau of Customs, a collection case with prayer for the issuance of a writ of preliminary attachment for the collection ofP37,195,859.00 in unpaid duties and taxes against Steel Asia Manufacturing Corporation (SAMC), which utilized fraudulent tax credit certificates in the payment of its duties. The case, docketed as Civil Case No. 01-102504, was raffled off to Branch 39 of the RTC of Manila.

On January 16, 2002, a writ of preliminary attachment was issued against SAMC in the aforementioned case. The writ was duly implemented and the raw materials, finished products and plant equipment of SAMC were subsequently attached. Petitioner and SAMC entered into a compromise agreement wherein the latter offered to pay on a staggered basis through thirty (30) monthly equal installments the P37,195,859.00 duties and taxes sought to be collected in the civil case. On August 20, 2003, the Director of the Criminal Investigation and Detention Group of the Philippine National Police, Eduardo Matillano, filed a letter-complaint against petitioner with the Ombudsman, which reads: Investigation conducted disclosed that Atty. Gil A. Valera was appointed as Deputy Commissioner, Bureau of Customs by the President on July 13, 2001, took his oath on August 03, 2001 and assumed his post on August 07, 2001. On January 30, 2002, while in the performance of his official functions, Atty. Gil A. Valera had compromised the case against the Steel Asia Manufacturing Corporation in Civil Case No. 01-102504 before Branch 39, RTC Manila without proper authority from the Commissioner of the Bureau of Customs in violation of Section 2316 TCCP (Authority of the Commission to make Compromise) and without the approval of the President, in violation of Executive Order No. 156 and Executive Order No. 38. Such illegal acts of Atty. Gil A. Valera indeed caused undue injury to the government by having deprived the government of its right to collect the legal interest, surcharges, litigation expenses and damagesand gave the Steel Asia unwarranted benefits in the total uncollected amount of FOURTEEN MILLION SEVEN HUNDRED SIXTY TWO THOUSAND FOUR HUNDRED SIXTY SEVEN PESOS AND SEVENTY CENTAVOS (P14,762,467.70), which is violative of Sections 3(e) and (g) respectively of RA 3019. Further investigation disclosed that Atty. Gil A. Valera while being a Bureau of Customs official directly and indirectly had financial or pecuniary interest in the CACTUS CARGOES SYSTEMS a brokerage whose line of business or transaction, in connection with which, he intervenes or takes part in his official capacity by way of causing the employment of his brother-in-law, Ariel Manongdo, thus, violating 3(h) of RA 3019 and RA 6713 and Section 4, RA 3019 as against Ariel Manongdo. Finally, investigation also disclosed that on April 21, 2002 Atty. Gil A. Valera traveled to Hongkong with his family without proper authority from the office of the President in violation of Executive Order No. 298 (foreign travel of government personnel) dated May 19, 1995, thus, he committed an administrative offense of Grave Misconduct.5 The administrative aspect of the complaint was docketed as OMB-C-A-03-0379-J. On November 12, 2003, then Ombudsman Simeon V. Marcelo issued a Memorandum 6 to Special Prosecutor Dennis M. Villa-Ignacio, inhibiting himself from the cases against the petitioner, and directing the latter to act in his stead and place. Acting pursuant to this authority, Special Prosecutor Villa-Ignacio made the finding that by entering into the compromise agreement, petitioner may have made concessions that may be deemed highly prejudicial to the government, i.e., waiver of the legal interest and the penalty charges imposed by law, as well as the virtual exoneration of SAMC of its fraudulent act of using spurious tax credit certificates. He issued an Order7 placing petitioner on preventive suspension for six (6) months without pay pending administrative investigation on the matter. On March 19, 2004, the petitioner filed his motion for reconsideration of the preventive suspension order. Upon the lapse of the period8 within which the Special Prosecutor, as acting Ombudsman, should have resolved the motion for reconsideration, petitioner filed a Petition for Certiorari and Prohibition before the Court of Appeals on March 29, 2004, docketed as CA-G.R. SP No. 83091 and raffled off to the Special First Division. On June 14, 2004, Special Prosecutor Villa-Ignacio inhibited himself from the cases of herein petitioner in view of a complaint filed by the latter against him. OMB-C-A-03-0379-J was next assigned to the OMB-MOLEO, represented by respondent Orlando C. Casimiro. On June 25, 2004, the Special First Division of the Court of Appeals rendered a Decision 9 setting aside the preventive suspension order of Special Prosecutor Villa-Ignacio and directing him to desist from taking any further action in OMB-C-A-03-0379-J. In so ruling, the appellate court held mainly that Special Prosecutor Villa-Ignacio was not authorized by law to sign and issue preventive suspension orders.

The OMB-MOLEO perfected an appeal from this decision on July 16, 2004. The appeal, docketed as G.R. No. 164250, was raffled off to the Second Division of this Court, and was eventually elevated motu proprio to the Court En Banc. In the meantime, the adjudication of OMB-C-A-03-0379-J continued and the respondent Deputy Ombudsman issued a Decision10 finding the petitioner administratively liable for grave misconduct and decreeing his dismissal from the service, with all the accessory penalties appertaining thereto. It was found that petitioner committed grave misconduct based on the following charges: (i) compromising the case against SAMC in Civil Case No. 01-102504 before Branch 39, RTC Manila, without proper authority from the Commissioner of the Bureau of Customs in violation of Section 231611of the Tariff and Customs Code, and without the approval of the President in violation of Section 4(d) of Executive Order (E.O.) No. 156 as amended by E.O. No. 38;12 (ii) causing the employment of his brother-in-law with the Cactus Cargoes Systems, Inc. whose principal business involves transactions with the Bureau of Customs in violation of Section 3(d) of Republic Act (R.A.) No. 3019;13 and (iii) traveling to Hongkong without conforming with the guidelines on the application to travel abroad for private purposes of public officials.14 The petitioner questioned this decision before the Court of Appeals, via a petition for review, and the case was raffled off to the 4th Division and docketed as CA G.R. SP. No. 86281. The 4th Division of the Court of Appeals refrained from ruling on the first charge against the petitioner in deference to this Court in G.R. No. 164250. It however found enough evidence to substantiate the second and third charges and issued and promulgated its assailed decision affirming the decision of respondent Deputy Ombudsman finding petitioner guilty of grave misconduct. It held as follows: After careful consideration of the matter, this Court finds it more prudent to defer from deciding the matters raised in connection with the first ground raised by petitioner in deference to the Supreme Court which is now tackling the very same issues. Respondents themselves argued that: "Needless to state, the Office of the Ombudsman lost no time in bringing the foregoing matters to the attention of the Honorable Supreme Court in a petition for review (G.R. No. 164250). Since then, the Supreme Court has motu proprio elevated the case from the Second Division to the Court En Banc, apparently because of the serious nature of the issues raised against the honorable Special First Division." (Rollo, p. 292) It should also be considered that a ruling of the Supreme Court on the applicability of Section 2316 of the TCC is determinative of the existence of a basis to the charges made against petitioner. Coming now to the second ground raised, petitioner asserted that the respondents erred in finding him liable for the employment of his brother-in-law Ariel N. Manongdo with CCSI, claiming that there is no evidence that he had any participation in the employment of said brother-in-law, to wit: "But, nothing is contained in the decision under review, particularly under the heading 'evidence for the complainant', which shows that petitioner did anything or performed any act or participated in any way, directly or indirectly, in the employment of his brother-in-law, Ariel N. Manongdo, with CCSI. Simply put, the finding of fact is also a conclusion of law with no fact or iota of evidence to support the discussion and conclusion in the decision under review." (Rollo, p. 48) Respondents countered that petitioner not only used his "official ascendancy" (Rollo, p. 348) to cause the employment of his brother-in-law with CCSI, but they further claimed that the joint-affidavit (Rollo, pp. 88-93) of the elements of the Criminal Investigation Detection Group (CIDG) showed that petitioner was a co-owner of CCSI as shown by the fact that he invited his close friends and relatives to the blessing of the brokerage firm. The relevant portion of said joint-affidavit stated that:

"12. Further, during the conduct of our surveillance on the lifestyle of Atty. Valera, we received information that he has sent text messages to his close friends and relatives for the blessing of his brokerage. The text of the message is as follows" 'ON WED, INVITE KO KAYO SA BLESSING NG BROKERAGE KO. ROOM 604, GLC Bldg., TM KALAW cor MABINI 6 TO 8 PM.' 13. Atty. Gil A. Valera's visitors were mostly his classmates from Ramon Magsaysay Cubao High School. He gave our asset his professional card (Annex '35'); 14. Our investigation disclosed that the GLC Bldg. is owned by a certain Mr. GERARDO L. CONTRERAS. According to Ms. JENNIE ESGUERRA, the building administrator, party on the 6thFloor was the inauguration of the CACTUS CARGOES SYSTEMS represented by its Marketing Coordinator, Mr. ARIEL MONONGDO (sic). Our information was that Monongdo is the brother-inlaw of Atty. Valera. Attached are the SEC Registration of Cactus Cargo Inc., (Annex '36') and the Contract of Lease signed by Mr. Ariel Monongdo the Marketing Manager of Cactus with the building administrator (Annex '37')." (Rollo, pp. 91-92) Respondents also asserted that CCSI is a customs brokerage firm which necessarily deals on a regular basis with petitioner's office, more particularly: "The Code of Conduct and Ethical Standards (R.A. No. 6713), under Section 7, subpar. (b)(3) thereof, is very specific in criminalizing the act of '(r)ecommend(ing) any person to any position in a private enterprise which has a regular or pending official transaction with their office.' On the other hand, Section 3 (d) of the Anti Graft and Corrupt Practices Act (sic) (R.A. No. 3019) punishes as criminal offense a public officer's act of '(a)ccepting or having any member of his family accept employment in a private enterprise which has pending official business with him during the pendency thereof or within one year after its termination." (Rollo, pp. 349-350) Parenthetically, petitioner also argued that this charge was also held by the Special First Division to be "too trivial". However, the Court considers that statement to have been made in relation to the question of whether or not the deputy ombudsman had the power to order petitioner's preventive suspension. That is, that statement should not be read to be a disposition of the question on the merits. Now, to dispose of the matter, it should be noted that the findings of the respondent Deputy Ombudsman regarding the second charge was based on two (2) grounds: first, the alleged act of using petitioner's influence to obtain employment for his brother-in-law and, second, the mere fact of employment of his brother-in-law in a company which has regular business with petitioner's office. While the evidence regarding the alleged use of influence by the petitioner to cause the employment of his brother-in-law maybe a little tenuous, the Court finds basis to the second ground. The Court notes that petitioner did not deny that CCSI has regular transactions with his office. Neither did he deny that Ariel Monongdo is his brother-in-law. Under Section 3(d) of R.A. No. 3019, as amended, mere acceptance by a member of his family of employment with a private enterprise which has pending official business with the official involved is considered a corrupt practice. It is clear, therefore, that mere acceptance by Ariel Manongdo, a family member, of the employment with CCSI rendered petitioner liable under the law. The Court, therefore, agrees with respondent Deputy Ombudsman when he held that: "Moreover, the Anti-Graft and Corrupt Practices Act (R.A. 3019) prohibits the public officer's act of accepting or having any member of his family accept employment in a private enterprise which has pending official business with him during the pendency thereof or within one year after its termination. Ariel N. Manongdo, as brother-in-law of respondent Valera falls squarely within the definition of family under Section 4 of the same law." (Rollo, p. 70) Coming now to the matter of his travel to Hongkong which is the subject matter of the third objection raised by petitioner, he first argued that his constitutional right to be informed of the charges against him had been violated. He asserted that while the Matillano Complaint charged him with violating E.O. No. 278, the questioned Decision was based on E.O. No. 39.

The Court does not agree with this assertion. It should be remembered that the present case is an administrative case while Section 14 of Art. 3 of the 1987 Constitution refers strictly to criminal prosecution. Said Constitutional provision reads: "SECTION 14. (1) No person shall be held to answer for a criminal offense without due process of law. (2) In all criminal prosecutions, the accused shall be presumed innocent until the contrary is proved, and shall enjoy the right to be heard by himself and counsel, to be informed of the nature and cause of the accusation against him, to have a speedy, impartial, and public trial, to meet the witnesses face to face, and to have compulsory process to secure the attendance of witnesses and the production of evidence in his behalf. However, after arraignment, trial may proceed notwithstanding the absence of the accused provided that he has been duly notified and his failure to appear is unjustifiable." It is well-settled that in an administrative case, due process is served when the respondent was given an opportunity to be heard (Utto v. Comelec, 375 SCRA 523 [2002]). In the instant case, petitioner cannot deny that he was given all the opportunity to present his side of the story. Thus, the Court agrees with respondents when they argued: "It is, thus, unfortunate that instead of demonstrating that he either complied with the requirement of presidential authority to travel that petitioner, as a lawyer, presumably knows to have existed (sic), or that he was legitimately exempted therefrom, petitioner instead resorted to the unavailing technicality that the complaint did not properly identify by the correct number [the] EO in point. Petitioner invokes the right to be informed of charges against an accused which, needless to state, has specific application to criminal charges. Needlessly, however, even in criminal cases, what matters is not the title of the law violated but rather the allegations of acts constituting a crime. In his case, the allegation in the complaint was simply that petitioner did not comply with the requirement for presidential authority to travel abroad. It certainly fully informed him of his infraction. After the issue was joined on such factual allegation, identifying and enforcing the applicable law by the public respondent simply followed as part and parcel of its quasi-judicial function." (Rollo, p. 35) Turning now to his defense that his foreign travel should not be taken against him because at the time he made the travel with his family, he was a private citizen because he was prevented by a temporary restraining order issued by this Court in CA-G.R. SP No. 69855 (in the case entitled Rosqueta versus Hon. Judge Juan Nabong) from assuming office and from dispossessing then Deputy Commissioner Rosqueta of the position of Deputy Commissioner. The Court cannot subscribe to this argument. Under the theory proposed by petitioner, there was in effect an interegnum as to his government service during the effectivity of the TRO. But it cannot be denied that once CA-G.R. SP No. 69855 was decided and petitioner was allowed to assume his position, the effectivity of his appointment retroacted to the original date of appointment. While the temporary restraining order was in effect, he nevertheless continued to assert on his right to the office. The Court also notes that petitioner did not even present any evidence to show that he had dissociated himself from the office at the time in question. As pointed out by the respondents' Comment: "For that matter, petitioner cannot claim that he suffered a gap in his public service during the period covered by the so-called TRO. He certainly was not dissociated from office during such period. He continued to be a public officer, notwithstanding, such that the application on him of the presidential authority to travel can not be deemed to have been then suspended." (Rollo, p. 356) xxx In fine, while the Court refrained from tackling the first charge against petitioner, the Court finds that as to the second and third charges, respondent Deputy Ombudsman did not err in finding petitioner guilty of grave misconduct.15 On September 30, 2005, without going into the issue of petitioner's guilt, the Court En Banc rendered a decision in G.R. No. 164250 ruling that the power to place a public officer or employee under preventive suspension pending an

investigation is lodged only with the Ombudsman or the Deputy Ombudsmen and affirmed the nullification and setting aside by the appellate court of the preventive suspension order of the Special Prosecutor. Petitioner now comes before us praying that he be absolved of the charges against him and that the decision of the 4th Division of the Court of Appeals which effectively affirmed the decision of the OMB-MOLEO be annulled and set aside. We shall now put a finis to this controversy that has raged bitterly for the past several months and shun further delay so as to ensure that this case would really attain finality and resolve whether petitioner is guilty of grave misconduct in connection with administrative case OMB-C-A-03-0379-J. First, we discuss the definition of grave misconduct as established by jurisprudence: Misconduct is a transgression of some established and definite rule of action, more particularly, unlawful behavior or gross negligence by a public officer.16 The misconduct is grave if it involves any of the additional elements of corruption, willful intent to violate the law or disregard of established rules, which must be proved by substantial evidence.17 At the onset, the Court would like to point out that in an administrative proceeding, the quantum of proof required for a finding of guilt is only substantial evidence, that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.18 We reiterate the well-settled rule that, when supported by substantial evidence and absent any clear showing of abuse, arbitrariness or capriciousness, findings of fact of administrative agencies, especially when affirmed by the Court of Appeals, are binding and conclusive upon this Court. 19 After a thorough examination of the evidence on record, we find no reason to depart from this rule. With respect to the second and third charges against the petitioner, the 4th Division of the Court of Appeals agreed with the findings of the OMB-MOLEO. The petitioner utterly failed to show that the factual findings of the respondent, affirmed by the appellate court, were attended with arbitrariness or abuse. The Matillano letter-complaint as well as its supporting affidavits made clear allegations under oath that petitioner recommended his brother-in-law, Ariel Manongdo, for employment with Cactus Cargoes Systems, Inc. (CCSI), a customs brokerage firm which necessarily deals on a regular basis with petitioner's office. Further, the Matillano letter-complaint also categorically asserted that petitioner traveled to Hongkong without obtaining the proper clearance. These allegations under oath constitute substantial evidence required in administrative proceedings. On the other hand, petitioner did not deny that Ariel Manongdo is his brother-in-law or that CCSI has regular transactions with his office. Neither did he deny that he failed to comply with the requirement of presidential authority to travel abroad. It is thus unfortunate that instead of demonstrating that he is innocent of the charges, the petitioner instead resorted to unavailing technicalities to disprove the allegations. The Supreme Court cannot weigh once more the evidence submitted not only before the Office of the Ombudsman but also before the Court of Appeals. All told, we are convinced that there is substantial evidence to hold petitioner liable for the second and third charges against him. Be that as it may, petitioner raises some legal issues regarding these charges which we shall settle. Anent the second charge, petitioner contends that under Section 3(d) of R.A. No. 3019, 20 a brother-in-law is not included within the scope of the word "family" and therefore, he cannot be found liable under the said law. In arguing so, petitioner refers to the definition of the word "family" found under Section 3(g) of R.A. No. 6713, which states: SEC. 3. Definition of Terms. - As used in this Act, the term: xxx (g) "Family of public officials or employees" means their spouses and unmarried children under eighteen (18) years of age. This contention deserves scant consideration.

Section 3 of R.A. No. 6713 is unequivocal in that its definition of terms is limited to as used in the Act. Under R.A. No. 6713, the term "family" was used only once under Section 4, par. (h),21 which implores public officials and employees and their families to observe "simple living." The restrictive definition accorded to the word "family" under the law is logical since children of public officials and employees who are above eighteen and already emancipated by law and freed from parental authority should not be bound by this standard where their emancipation may lead them to an otherwise private lifestyle or one which is not beholden to the public trust. This otherwise perfect logic would result in irrationality if we follow the contention of petitioner that the definition of "family" under R.A. No. 6713 should also apply to R.A. No. 3019. It makes no rhyme nor reason to suppose that public officials and employees are prohibited from having their children under eighteen years accept employment in a private enterprise having pending official business before their office, and yet are allowed to have their children over eighteen years, which is the employable age, to do so. What petitioner fails to mention is that R.A. No. 6713 itself prohibits the act of public officials and employees during their incumbency to recommend any person to any position in a private enterprise which has a regular or pending official transaction with their office.22 Certainly, the definition of the word "family" under said law would unduly limit and render meaningless Section 3(d) of R.A. No. 3019 if applied to the latter. In fact, family relation is defined under Section 4 of R.A. No. 301923 which, according to the said section, "shall include the spouse or relatives by consanguinity or affinity in the third civil degree." Thus, we need not look beyond the provisions of R.A. No. 3019 to hold that a brother-in-law falls within the definition of family under Section 3(d) thereof. Proceeding now to the legal issue with respect to the third charge, it is advanced by petitioner that a public official reverts to his quo ante status as a private citizen upon being subjected to a temporary restraining order directing him to refrain from holding his office. Hence, he need not comply with the requirements for traveling abroad during said period. We are not persuaded. We agree with the appellate court that petitioner suffered no gap in his public service while the temporary restraining order was in effect. The nature of a temporary restraining order which would have the effect of preventing a public officer from discharging his office is provisional until a preliminary injunction is issued by the court hearing the case. Because of its temporary character, it would not have the effect of divesting such officer of the public character of his office. It cannot be denied that once CA-G.R. SP No. 69855 was decided and petitioner was allowed to re-assume his office, the effectivity of his appointment retroacted to the original date of his appointment. He certainly remained as a public officer during such period and it was incumbent upon him, especially since he was continuously asserting his right to the office, to comply with the guidelines on the application to travel abroad for private purposes 24 of public officials. We now come to the pivotal first charge facing petitioner that was left unresolved by the Court of Appeals in deference to this Court - that of compromising the case against SAMC without prior authorization from the Commissioner of Customs in violation of Section 2316 25 of the Tariff and Customs Code, and without prior approval of the President as required by Section 4(d)26 of E.O. No. 156 as amended by E.O. No. 38. Prefatorily, we emphasize that violations or disregard of regulations governing the collection of government funds are administratively sanctionable. Intended to raise revenue for government operations, these regulations must be followed strictly. On the first provision of the special law alleged to have been violated by petitioner, Title VI Book II of the Tariff and Customs Code entitled "ADMINISTRATIVE AND JUDICIAL PROCEEDINGS" is divided as follows: 1. Part 1 - Search, Seizure and Arrest, 2. Part 2 - Administrative Proceedings, 3. Part 3 - Judicial Proceedings, 4. Part 4 - Surcharges, Fines and Forfeitures,

5. Part 5 - Disposition of Property in Customs Custody, and 6. Part 7 - Fees and Charges. (Note: No Part 6) According to petitioner, Sections 2301 up to 2316 are provisions found under Part 2 and pertain to administrative proceedings, while Sections 2401 and 2402 are provisions found under Part 3 and pertain to judicial proceedings. Section 2316 provides: Section 2316. Authority of Commissioner to make Compromise.-Subject to the approval of the Secretary of Finance, the Commissioner of Customs may compromise any case arising under this Code or other laws or part of laws enforced by the Bureau of Customs involving the imposition of fines, surcharges and forfeitures unless otherwise specified by law. While Section 2401 as amended, which was made by petitioner as basis for his entering into the compromise agreement, provides: Section 2401. Supervision and Control over Criminal and Civil Proceedings.-Civil and criminal actions and proceedings instituted in behalf of the government under the authority of this Code or other law enforced by the Bureau shall be brought in the name of the government of the Philippines and shall be conducted by customs officers but no civil or criminal action for the recovery of duties or the enforcement of any fine, penalty or forfeiture under this Code shall be filed in court without the approval of the Commissioner. Thus, for petitioner, since the case wherein the compromise agreement was entered into was already pending before a regular court, the requirement of prior authority of the Commissioner of Customs to enter into a compromise is not necessary. This contention must fail. Basic is the maxim in statutory construction that a statute must be read or construed as a whole or in its entirety. All parts, provisions, or sections, must be read, considered or construed together, and each must be considered with respect to all others, and in harmony with the whole.27 A reading of the provisions cited by the petitioner will show that there is really no conflict between them. Section 2401 covers the matter of the institution and filing of civil and criminal actions by customs officers, which is subject to the approval of the Commissioner if filed for the recovery of duties or the enforcement of any fine, penalty or forfeiture under the Code. It does not cover the compromise of such civil or criminal actions, while Section 2316 is the provision that deals with such a situation. In fact, the latter is categorical in providing an encompassing scope for the strict conditions for any . Its coverage includes "any case arising under this code or other laws or part of laws enforced by the Bureau of Customs involving the imposition of fines, surcharges and forfeitures unless otherwise specified by law." Doubtless, civil cases for collection of customs taxes and duties, including the one in the case at bar, would fall under this coverage. To be sure, the adoption of petitioner's interpretation of these provisions would result in absurdity that could not have been intended by Congress. Following his logic, the Commissioner of Customs has to actively participate and seek the approval of the Secretary of Finance in compromising administrative collection cases; whereas, customs officers without even seeking authority from the Commissioner or approval from the Secretary of Finance can proceed to bargain off much larger collection cases in courts. Clearly, the Court cannot countenance the abuse and corruption engendered by this misreading of the law. Petitioner next claims that there was no violation of Section 4(d)28 of E.O. No. 156 as amended by E.O. No. 38, when he entered into the compromise agreement without the express approval of the President. E.O. No. 156, as amended by E.O. No. 38, created a Special Task Force to investigate and prosecute the irregularities relative to the "tax credit scam" committed at the center of the Department of Finance and to recover and collect revenues lost by the government through the "scam." Section 4(d) thereof provides: Section 4. Powers, Duties and Functions. The Task Force shall have the following powers, duties and functions:

xxx d) To recommend the settlement of cases for approval of the President, subject to appropriate rules on the settlement of claims by the government; In the case at bar, and during the time relevant to this case, 29 specifically on May 10, 2002, the then Chairman of the Task Force, Department of Finance Undersecretary Cornelio Gison, reported to the then Department of Finance Secretary Jose Isidro Camacho the successful collection by petitioner of P37,195,859.00 in the SAMC case. On October 3, 2002, in his Memorandum,30 Department of Finance Undersecretary Innocencio P. Ferrer, Jr., who succeeded Undersecretary Gison, also congratulated petitioner for his accomplishment in the said case. Petitioner invokes the principle of qualified political agency wherein these acts of the Special Task Force Chairmen who both approved the compromise agreement and lauded him for his accomplishment in the recovery efforts against the original grantees and buyers of fraudulently secured tax credit certificates - should be considered as approval by the President herself, especially since she did not disapprove of nor reprobate their acts. This argument is likewise unavailing. E.O. No. 156, as amended by E.O. No. 38, is clear in its requirement that in cases involving tax credit scams the favorable recommendation for approval by the Special Task Force and the approval by the President of the Republic are both required. The approval by the Chairmen of the Special Task Force is still subject to approval of the President. Prior presidential approval is the highest form of check and balance within the Executive branch of government and cannot be satisfied by mere failure of the President to reverse or reprobate the acts of subordinates. To sanction otherwise would be to ask the Court to reward passivity and render nugatory the fundamental safeguard required under the law. The Court notes that in Civil Case No. 01-102504, SAMC defrauded the government of the amount ofP37,195,859.00 in unpaid duties and taxes with the use of fraudulent tax credit certificates that were directly and originally procured by its officials on the basis of inexistent supporting documents. The legal interest, surcharges, litigation expenses and damages of this principal amount totaled a staggering P14,762,467.70, which petitioner effectively waived through his entering into a compromise agreement with SAMC. We find lamentable the utter disregard of the legal requirements for entering into a compromise displayed by petitioner which is further aggravated by the fact that there were already sufficient properties of SAMC that were attached in the said case to satisfy not only the principal amount owed but also the penalties, surcharges and interests. No amount of reasoning can infuse an empty plea to justify this bloodletting. Fundamental it is in law that taxes being the lifeblood of the government,31 such must be continuously replenished and carefully preserved-and no public official should maintain a standard lower than utmost diligence in keeping our revenue system flowing. It is not for any government official to deem it within his complete control to let precious blood flow to the private sphere where it would have been rightfully and lawfully collected by the public through the government. Persons appointed to the revenue collection agencies of the government, like petitioner, ought to live up to the strictest standards of honesty and integrity in the public service and must at all times be above suspicion. Because of the nature of their office, the officials and employees of the Bureau of Customs should serve as the primary role models in the faithful observance of the constitutional canon that public office is a public trust. Petitioner, being a Deputy Commissioner of the Revenue Collection Monitoring Group, should know that his actuations reflect adversely on the integrity and efficiency of his office and erode the faith and confidence of our people in its daily administration. We find that the totality of petitioner's acts constitutes flagrant disregard of established rules constitutive of grave misconduct. One final note. It appears that petitioner is no longer a Deputy Commissioner of Customs. 32 This fact, however, does not render this petition moot and academic. As held in Gallo v. Cordero: . . . [T]he jurisdiction that was ours at the time of the filing of the administrative complaint was not lost by the mere fact that the respondent public official had ceased to be in office during the pendency of his case. The Court retains its jurisdiction either to pronounce the respondent official innocent of the charges or declare him guilty thereof. A contrary rule would be fraught with injustices and pregnant with dreadful and dangerous implications. For what remedy would the people have against a judge or any other public official who resorts to wrongful and illegal conduct during his last days in office? xxx If innocent, respondent official merits

vindication of his name and integrity as he leaves the government which he has served well and faithfully; if guilty, he deserves to receive the corresponding censure and a penalty proper and imposable under the situation.33 WHEREFORE, premises considered, the petition is DENIED. The assailed Decision dated February 28, 2005 of the Court of Appeals in CA G.R. SP. No. 86281 is hereby AFFIRMED. SO ORDERED. REYNATO S. PUNO Chief Justice

WE CONCUR: ANGELINA SANDOVAL-GUTIERREZ Associate Justice RENATO C. CORONA Associate Justice ADOLFO S. AZCUNA Associate Justice

TERESITA J. LEONARDO-DE CASTRO Associate Justice

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. REYNATO S. PUNO Chief Justice

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 176380 June 18, 2009

PILIPINAS SHELL PETROLEUM CORPORATION, Petitioner, vs. COMMISSIONER OF CUSTOMS, Respondent. DECISION BRION, J.: Before us is the Petition for Review on Certiorari1 filed by petitioner Pilipinas Shell Petroleum Corporation (Shell) questioning the Decision2 of the Court of Appeals (CA) in CAG.R. SP No. 78564. The CA decision set aside the resolutions3 issued by the Court of Tax Appeals (CTA) in CTA Case No. 6484, which in turn denied the respondent Commissioner of Customs (respondent) Motion to Dismiss the petition for review Shell filed with the tax court. The CA decision effectively dismissed Shells tax protest case. BACKGROUND FACTS Shell is a domestic corporation engaged, among others, in the importation of petroleum and its by-products into the country. For these importations, Shell was assessed and required to pay customs duties and internal revenue taxes. In 1997 and 1998, Shell settled its liabilities for customs duties and internal revenue taxes using tax credit certificates (TCCs) that were transferred to it for value by several Board of Investment (BOI)-registered companies. The transfers of the TCCs to Shell were processed by the transferors-BOI-registered companies and were eventually approved by the One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (the Center). The Center is composed of the following government agencies: the Department of Finance (DOF), the Bureau of Internal Revenue (BIR), the Bureau of Customs (BOC), and the BOI. On the belief the TCCs were actually good and valid, both the BIR and the BOC accepted and allowed Shell to use them to pay and settle its tax liabilities. In a letter dated November 3, 1999 (Centers November 3 letter), the Center, through the Secretary of the DOF, informed Shell that it was cancelling the TCCs transferred to and used as payment by the oil company, pursuant to its EXCOM Resolution No. 03-05-99. The Center claimed that after conducting a post-audit investigation, it discovered that the TCCs had been fraudulently secured by the original grantees who thereafter transferred them to Shell; no categorical finding was made regarding Shells participation in the fraud. In view of the cancellation, the Center required Shell to pay the BIR and BOC the amounts corresponding to the TCCs Shell had used to settle its liabilities. Shell objected to the cancellation of the TCCs claiming that it had been denied due process. Apparently, Shell had sent a letter to the Center on November 3, 1999 ( Shells November 3 letter) adducing reasons why the TCCs should not be cancelled; Shell claimed that the Centers November 3 letter cancelling the TCCs was issued without considering its letter of the same date. The Center did not act on Shells November 3 letter; instead, the respondent sent a letter dated November 19, 1999 (respondents November 19 letter) to Shell requiring it to replace

the amount equivalent to the amount of the cancelled TCCs used by Shell to satisfy its customs duties and taxes. The pertinent portion of the respondents November 19 letter states: In view of such cancellation, it becomes apparent that the Customs Official Receipts previously issued to [Shell] with the applications of the [TCCs] cited in said lists becomes null and void ab initio. In view thereof, your corporation must have to replace amount of P209,129,141.00 which is equivalent to the amount of the [TCCs] cancelled. The corresponding interest, surcharge and penalties thereof shall be relayed to you in due time after the recomputation. Your immediate response to this demand letter shall be appreciated. Shell submitted its reply letter dated December 23, 1999. 4 Shell maintained that the cancellation was improper since this was done without affording the corporation its right to due process. It further claimed that the existence of fraud in the issuance and transfer of the TCCs, or even Shells participation in the alleged fraud, had not been sufficiently established. Three years later, through letters dated February 15, February 20, and April 12, 2002 (respondents collection letters), the respondent, through Atty. Gil Valera (Atty. Valera), Deputy Commissioner for Revenue Collections Monitoring Group, formally demanded from Shell payment of the amounts corresponding to the listed TCCs that the Center had previously cancelled. Except for the amount due, the respondents collection letters were similarly worded, as follows: In as much as the same [TCCs] were reported as having been utilized to pay your government obligations earlier, formal demand is hereby being made upon you to pay back the total amount of x x x within five (5) days from receipt thereof [sic]. Failure on your part to settle your obligation would constrain the Bureau of Customs to initiate legal action in the regular court. Please consider this as our last and final demand. As mentioned, all three letters were signed by Atty. Valera. Shell replied to the respondents February 15 and 20, 2002 collection letters via letters dated February 27 and March 4, 2002. Before it could reply to the respondents April 12, 2002 collection letter, Shell received on April 23, 2002 the summons in one 5 of the three collection cases6 filed by respondent against Shell before the Regional Trial Court (RTC) of Manila. In these collection cases, the respondent sought to recover the amounts covered by the cancelled TCCs; the complaints were all similarly worded except for the amount and TCCs involved, and were signed by Atty. Valera. On May 23, 2002, Shell filed with the CTA a Petition for Review questioning the BOC collection efforts for lack of legal and factual basis. To quote the issues Shell submitted in its CTA petition:

1. Whether or not the TCCs subject of the instant petition for are genuine and authentic; 2. Whether or not petitioners right to due process of law was violated by the issuance of the 1999 collection letter and/or the filing of the collection cases, both of which seek to enforce the Excom Resolution; 3. Whether or not attempts to collect unpaid duties and taxes, being based on the bare allegation that the TCCs were fraudulently issued and transferred, can be given any effect considering that fraud is never presumed but must be proven; 4. Assuming arguendo that fraud was present in the issuance of the original TCCs, whether or not such fraud can work to the prejudice of an innocent purchaser for value who is not a party to such fraud; 5. Whether or not the respondent and the DOF/Center are stopped from invalidating the TCCs and the transfers and utilizations thereof; 6. Whether or not the TCCs, having been utilized, are already functus officio and can no longer be cancelled.7 The respondent filed a motion to dismiss Shells petition f or review on the ground of prescription. The respondent claimed that Shells petition was filed beyond the 30 -day period provided by law for appeals of decisions of the Commissioner of Customs to the CTA. The respondent also contended that this 30-day period should be counted from the time Shell received the respondents collection letters. Shell countered by invoking the case of Yabes v. Flojo,8 where this Court ruled, under the circumstances of that case, that a complaint for collection filed in court may be considered a final decision or assessment of the Commissioner9 that opened the way for an appeal to the CTA. Applying that principle, Shell contends the 30-day reglementary period should be counted from the date it received the summons for one of the collection cases filed by respondent or, specifically, on April 23, 2002, not from the date that it received the respondents collection letters. The petition for review, having been filed on May 23, 2002, was thus instituted within the period provided by law. The CTA found the respondents contentions unmeritorious, and thus denied his motion to dismiss in a Resolution dated January 28, 2003.10 The tax court noted that the collection letters were issued and signed only by Atty. Valera, not by the respondent, so that Shell was justified in not heeding the demand. The CTA consequently declared that it is the filing of the collection cases in court that should instead be considered as the final decision of the respondent, and only then should the 30-day period to appeal commence. The respondent elevated the CTA decision to the CA after the CTA denied its motion for reconsideration. 11 The appellate court annulled and set aside the CTA rulings in its decision dated May 3, 2006.12 It found the collection letters written by Atty. Valera "indicative of [respondents] final rulings on the assessments concerning the spurious TCCs xxx which were then already appealable to the respondent CTA. Each letter carried a clear demand to pay within five (5)

days from receipt, and each also carried a warning that this [is] our last and final demand." On the authority of Atty. Valera to issue the collection letters, the appellate court pointed to Customs Memorandum Circular (CMC) No. 27-2001 that delegated the Commissioners authority on matters relating to tax credit and transfers of tax credit to Atty. Valera, and to Customs Memorandum Order (CMO) No. 40-2001 that delegated the authority to sign, file, and prosecute civil complaints likewise to Atty. Valera. Shells attempt to have the CA decision reconsidered proved unsuccessful; hence, this petition. THE PETITION Shell insists, in this petition for review on certiorari, that its petition for review with the CTA was filed within the 30-day reglementary period that, it posits, should be counted from the date it received the summons for the collection cases filed by respondent against it before the regular court. Shell cites this Courts ruling in Yabes v. Flojo. 13 On the assumption that the collection letters amounted to a decision on its protest, Shell submits that these are not "decision[s] of the Commissioner of Customs" appealable to the CTA under Section 7, Republic Act (RA) No. 1125, as amended by RA No. 9282. 14 It maintains that it is the Commissioners decision on the taxpayers liability for customs duties and taxes, not the decision of his subordinate, which is the proper subject of the appeal to the CTA, the delegation of authority under CMC No. 27-2001 and CMO No. 40-2001 notwithstanding. It additionally claims that Atty. Valera was prohibited from carrying out his delegated duties under the injunctive writ issued the RTC of Manila in its Order dated August 27, 2001, and the Temporary Restraining Order the CA issued on April 4, 2002. THE COURTS RULING We resolve to DENY Shells petition; the present case does not involve a tax protest case within the jurisdiction of the CTA to resolve. The parties argue over which act serves as the decision of the respondent that, under the law, can be the subject of an appeal before the CTA, and from which act the 30-day period to appeal shall be reckoned. Shell insists it should be the filing of the collection suits as this was indicative of the finality of the respondents action. The respondent, on the other hand, claims, it should be the earlier act of sending the collection letters where the respondent finally indicated his resolve to collect the duties due and demandable from Shell. Section 7 of RA No. 1125, as amended, states: Sec. 7. Jurisdiction. The CTA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal xxx; xxx xxx xxx

4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges, seizure, detention, or release or property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs; These decisions of the respondent involving customs duties specifically refer to his decisions onadministrative tax protest cases, as stated in Section 2402 of the Tariff and Customs Code of the Philippines (TCCP): Section 2402. Review by Court of Tax Appeals. The party aggrieved by a ruling of the Commissioner in any matter brought before him upon protest or by his action or ruling in any case of seizure may appeal to the Court of Tax Appeals, in the manner and within the period prescribed by law and regulations. Unless an appeal is made to the Court of Tax Appeals in the manner and within the period prescribed by laws and regulations, the action or ruling of the Commissioner shall be final and conclusive. [Emphasis supplied.] A tax protest case, under the TCCP, involves a protest of the liquidation of import entries. A liquidation is the final computation and ascertainment by the collector of the duties on imported merchandise, based on official reports as to the quantity, character, and value thereof, and the collectors own finding as to the applicable rate of duty; it is akin to an assessment of internal revenue taxes under the National Internal Revenue Code15where the tax liability of the taxpayer is definitely determined. In the present case, the facts reveal that Shell received three sets of letters: a. the Centers November 3 letter, signed by the Secretary of Finance, informing it of the cancellation of the TCCs; b. the respondents November 19 letter requiring it to replace the amount equivalent to the amount of the cancelled TCCs used by Shell; and c. the respondents collection letters issued thr ough Atty. Valera, formally demanding the amount covered by the cancelled TCCs. None of these letters, however, can be considered as a liquidation or an assessment of Shells import tax liabilities that can be the subject of an administrative tax protest proceeding before the respondent whose decision is appealable to the CTA. Shells import tax liabilities had long been computed and ascertained in the original assessments, 16 and Shell paid these liabilities using the TCCs transferred to it as payment. It is even an error to consider the letters as a "reassessment" because they refer to the same tax liabilities on the same importations covered by the original assessments. The letters merely reissued the original assessments that were previously settled by Shell with the use of the TCCs. However, on account of the cancellation of the TCCs, the tax liabilities of Shell under the original assessments were considered unpaid; hence, the letters and the actions for collection. When Shell went to the CTA, the issues it raised in its petition were all related to the fact and efficacy of the payments made, specifically the genuineness of the TCCs; the

absence of due process in the enforcement of the decision to cancel the TCCs; the facts surrounding the fraud in originally securing the TCCs; and the application of estoppel. These are payment and collection issues, not tax protest issues within the CTAs jurisdiction to rule upon.
1avv phi1

We note in this regard that Shell never protested the original assessments of its tax liabilities and in fact settled them using the TCCs. These original assessments, therefore, have become final, incontestable, and beyond any subsequent protest proceeding, administrative or judicial, to rule upon. To be very precise, Shells petition before the CTA principally questioned the validity of the cancellation of the TCCs a decision that was made not by the respondent, but by the Center. As the CTA has no jurisdiction over decisions of the Center, Shells remedy against the cancellation should have been a certiorari petition before the regular courts, not a tax protest case before the CTA. Records do not show that Shell ever availed of this remedy. Alternatively, as we held in Shell v. Republic of the Philippines,17 the appropriate forum for Shell under the circumstances of this case should be at the collection cases before the RTC where Shell can put up the fact of its payment as a defense. Parenthetically, our conclusions are fully in step with what we held in Shell v. Republic18 that a case becomes ripe for filing with the RTC as a collection matter after the finality of the respondents assessment. We hereby confirm that this assessment has long been final, and this recognition of finality removes all perceived hindrances, based on this case, to the continuation of the collection suits. In Dayrit v. Cruz,19 we declared on the matter of collection that: [A] suit for the collection of internal revenue taxes, where the assessment has already become final and executory, the action to collect is akin to an action to enforce the judgment. No inquiry can be made therein as to the merits of the original case or the justness of the judgment relied upon. In light of our conclusion that the present case does not involve a decision of the respondent on a matter brought to him as a tax protest, Atty. Valeras lack of authority to issue the collection letters and to institute the collection suits is irrelevant. For this same reason, the injunction against Atty. Valera cannot be invoked to enjoin the collection of unpaid taxes due from Shell. WHEREFORE, we DENY Shells petition for review on certiorari and AFFIRM the result of the Decision of the Court of Appeals dated May 3, 2006 in CA-G.R. SP No. 78564, based on the principles and conclusion laid down in this Decision. Shells petition for review before the Court of Tax Appeals, docketed as CTA Case No. 6484, is DISMISSED. SO ORDERED. ARTURO D. BRION Associate Justice

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 165027 October 12, 2006

PROTON PILIPINAS CORPORATION, petitioner, vs. REPUBLIC OF THE PHILIPPINES, represented by the BUREAU OF CUSTOMS, respondent.

DECISION

CHICO-NAZARIO, J.: This case is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to annul and set aside the Court of Appeals Decision1 in CA-G.R. SP No. 77684 entitled, Proton Pilipinas Corporation v. Hon. Juan C. Nabong, dated 29 April 2004 and its Resolution2 dated 2 August 2004, which respectively dismissed the Petition for Certiorari filed by petitioner and denied its Motion for Reconsideration, thereby affirming the Orders issued by the Regional Trial Court (RTC) of Manila dated 24 January 20033 and 15 April 2003.4 The controversy arose from the following facts: Herein petitioner Proton Pilipinas Corporation (Proton) is a corporation duly organized and existing under Philippine laws and duly registered5 with the Board of Investments (BOI). It is engaged in the business of importing, manufacturing, and selling vehicles. Sometime in 1997, Devmark Textile Industries, Inc. (Devmark), a corporation duly registered with the Securities and Exchange Commission (SEC) and with the BOI, and engaged in the business of spinning, knitting, weaving, dyeing, and finishing all types of textile, yarns, and fabrics, together with Texasia, Inc. (Texasia), expressed the intention to purchase the various vehicles distributed and marketed by petitioner. In payment thereof, the above named companies offered petitioner their Tax Credit Certificates (TCCs) worthP30,817,191.00. The companies, through their officers, guaranteed petitioner that the TCCs were valid, genuine, and subsisting. They further assured petitioner that said TCCs were a safe and a valid mode of payment for import duties and taxes as they were issued by the Department of Finance (DOF) and duly honored and accepted by the Bureau of Customs (BOC). Persuaded by the representations and assurances made by the two companies as to the legality of the transaction, Paul Y. Rodriguez, in his capacity as Executive Vice-President of

Proton, signed a Deed of Assignment6 with Eulogio L. Reyes, General Manager of Devmark. The terms and conditions of the Deed of Assignment are as follows: 1. That the acceptance by the ASSIGNEE of the above duty/taxes credit certificate being assigned by ASSIGNOR shall be subject to condition that the [DOF] approves the proposed assignment. 2. For the purpose of this assignment, the above duty/taxes certificates being assigned hereby to ASSIGNEE shall not be credited as payment of ASSIGNORs account unless and until ASSIGNEE has in turn utilized/applied the same with the [BOC] or Bureau of Internal Revenue [BIR] for payment of each duty/tax obligations. 3. ASSIGNEE undertakes to issue to ASSIGNOR the Tax Credit corresponding credit notes, as when the above duty/taxes credit certificates was (sic) use[d]/applied, either partially or fully by the ASSIGNEE, in payment of ASSIGNEEs duty/taxes obligation with the [BOC] or [BIR], respectively. 4. Withstanding the above-stated arrangement, such Tax Credit assigned and transferred by the ASSIGNOR to ASSIGNEE shall be subject to post-audit by the Government and shall be credited to the ASSIGNOR only upon actual availment thereof by ASSIGNEE. 5. If the whole or any portion of the Tax Credit assigned and transferred by ASSIGNOR to the ASSIGNEE is disallowed by the Government upon post-audit or cannot be utilized for any cause or reason not attributable to the fault negligence of the ASSIGNEE, the whole amount corresponding such Tax Credit or such portion thereof as is disallowed by the Government or cannot be utilized by ASSIGNEE shall be paid in cash to ASSIGNEE by the ASSIGNOR immediately upon receipt of written notice of such event.7 Consequently, the TCCs, as well as their transfers to petitioner, were submitted to the DOF for evaluation and approval. Thereafter, the DOF, through its Undersecretary Antonio P. Belicena, cleared said TCCs for transaction and approved them for transfer. For that reason, petitioner delivered 13 vehicles with a total value of P10,778,500.00 and post-dated checks worth P10,592,618.00, in exchange for the said TCCs, to Devmark and Texasia in accordance with their agreement. In turn, petitioner used the TCCs for payment of its customs duties and taxes to the BOC. In the interim, the Office of the Ombudsman (Ombudsman) under Hon. Aniano Desierto began conducting an investigation on the alleged "P60 Billion DOF Tax Credit Scam" in July 1998. On 30 March 1999, Silverio T. Manuel, Jr., as Graft Investigator II, was given the assignment to look into the alleged irregular issuances of four TCCs to Devmark and its subsequent transfer to and utilization by petitioner. Based on the Fact-Finding Report8 dated 29 October 1999 of the Fact Finding and Investigation Bureau, Ombudsman, the TCCs were found to be irregularly and fraudulently issued by several officers of the DOF, including its Department Undersecretary Belicena, to Devmark. As revealed in the said Report, all the pertinent documents submitted by Devmark in support of its application for the TCCs were fake and spurious. As a consequence thereof, the transfers of the subject TCCs to petitioner and their subsequent use of the same was declared invalid and illegal. The Report recommended among other things, that the directors of the petitioner and Devmark, along with several DOF officers, be criminally charged

with violation of Section 3(e) and (j) of Republic Act No. 3019,9otherwise known as The AntiGraft and Corrupt Practices Act. On the weight of the Fact-Finding Report, the Ombudsman filed with the Sandiganbayan, Criminal Cases No. 26168 to 7110 charging DOF Undersecretary Belicena together with Reyes, General Manager of Devmark, Peter Y. Rodriguez and Paul Y. Rodriguez, in their capacity as Director and Executive Vice-President/Chief Operating Officer of the petitioner, respectively, for violation of Section 3(e) and (j) of Republic Act No. 3019. In turn, petitioner filed a criminal case for Estafa against the officers of Devmark with the City Prosecutor of Mandaluyong, docketed as I.S. No. 00-42921-K, entitled, Proton Pilipinas, Inc. v. Robert Liang. The BOC on the other hand, filed Civil Case No. 02-10265011 against petitioner before the RTC for the collection of taxes and customs duties, which remain unpaid because the subject TCCs had been cancelled brought about by petitioners use of fraudulent TCCs in paying its obligations. Petitioner then filed a Motion to Dismiss12 the aforesaid civil case filed against it by BOC on the grounds of lack of jurisdiction, prematurity of action, and litis pendentia. The said Motion, however, was denied by the trial court in its Order dated 24 January 2003. Petitioner sought reconsideration of the above-mentioned Order, but the same was likewise denied in another Order dated 15 April 2003. Feeling aggrieved, petitioner filed before the Court of Appeals a Petition for Certiorari under Rule 65 of the Revised Rules of Civil Procedure seeking to annul the Orders of the trial court. On 29 April 2004, the Court of Appeals rendered a Decision dismissing the Petition for lack of merit and affirming the RTC Orders. On 7 June 2004, petitioner moved for reconsideration but the same was denied in the Court of Appeals Resolution dated 2 August 2004. Hence, this Petition. In the petitioners Memorandum,13 it ascribes the following errors committed by the Court of Appeals: I. The Honorable Court of Appeals erred in affirming the RTC Orders and, consequently, in not dismissing the Civil Case because, per Section 4, RA 8249, the Sandiganbayan has sole and exclusive jurisdiction over the subject matter thereof. 1. Per Section 4, RA 8249, the Sandiganbayan has sole and exclusive jurisdiction over the subject matter of the Civil Case to the exclusion of the RTC. a. The expanded jurisdiction of the Sandiganbayan under RA 8249 covers the subject matter of the Civil Case. i. Before, the exclusive jurisdiction of the Sandiganbayan over civil actions was limited only to "civil liability arising from the offense charged" per [Presidential Decree] PD 1861 and RA 7975. But now under RA 8249,

Sandiganbayan has the exclusive expanded jurisdiction over all civil actions for recovery of civil liability regardless of whether or not they arise from the offense charged. ii. In fact, the language of the law is clear and extant that this expanded jurisdiction of the Sandiganbayan supersedes "any provision of law or the rules of court." iii. The subject matter of the Civil Case, being the civil aspect of the Criminal Cases, is deemed simultaneously instituted in the latter. II. The Honorable Court of Appeals erred in holding that the litis pendentia rule is inapplicable and that the civil case is not premature. 1. The requisites of litis pendentia are present in the Criminal Cases and the Civil Case. a. There is identity of parties or at least such as representing the same interest in both actionsb. There is identity of rights asserted and relief prayed for, the relief being founded on the same factsc. The identity in the two (2) cases is such that the judgment that may be rendered in the pending case would, regardless of which party is successful, amount to res judicata in the otherd. Even assuming that not all the requisites of litis pendentia under the Rules of Court are present, the pendency of the Criminal Cases constitute some form of litis pendentia by express provision of Section 4, RA 8249. 2. In any event, the Civil Case is premature since the validity or invalidity of the TCCs is a prejudicial issue that has yet to be resolved with finality by the Sandiganbayan in the Criminal Cases. Given the foregoing, this Court restates the issues for resolution in the Petition at bar, as follows: I. Whether or not the jurisdiction over Civil Case No. 02-102650, involving collection of unpaid customs duties and taxes of petitioner, belongs to the Sandiganbayan and not to the RTC, as it can be considered the civil aspect of the Criminal Cases filed before the Sandiganbayan, hence, deemed instituted in the latter. II. Whether or not the Court of Appeals erred in holding that, the rule on litis pendentia is inapplicable in the present case.

III. Whether or not the institution of the aforesaid Civil Case is premature as the determination of the validity or invalidity of the TCCs is a prejudicial issue that must first be resolved with finality in the Criminal Cases filed before the Sandiganbayan. The Petition is bereft of merit. In the instant case, petitioner argues that since the filing of the criminal cases was anchored on the alleged conspiracy among accused public officials, including the corporate officers, regarding the anomalous and illegal transfer of four TCCs from Devmark to petitioner and the latters subsequent use of three TCCs in paying their customs duties and taxes to the detriment of the government, the civil case regarding collection of unpaid customs duties and taxes was deemed impliedly instituted with the criminal cases before the Sandiganbayan, being the civil aspect of the criminal cases. To buttress its assertion, petitioner quoted the last paragraph of Section 4, Republic Act No. 8249, which states that: Any provision of law or Rules of Court to the contrary notwithstanding, the criminal action and the corresponding civil action for the recovery of civil liability shall at all times be simultaneously instituted with, and jointly determined in, the same proceeding by the Sandiganbayan or the appropriate courts, the filing of the criminal action being deemed to necessarily carry with it the filing of the civil action, and no right to reserve the filing of such civil action separately from the criminal action shall be recognized: x x x. It is a truism beyond doubt that the jurisdiction of the court over a subject matter is conferred only by the Constitution or by law.14 In addition, it is settled that jurisdiction is determined by the allegations in the complaint.15 Accordingly, as can be gleaned from the Complaint for Collection of Money with Damages16 filed by the Government against petitioner, what the former seeks is the payment of customs duties and taxes due from petitioner, which remain unpaid by reason of the cancellation of the subject TCCs for being fake and spurious. Said Complaint has nothing to do with the criminal liability of the accused, which the Government wants to enforce in the criminal cases filed before the Sandiganbayan. This can be clearly inferred from the fact that only petitioner was impleaded in the said Complaint. While it is true that according to the aforesaid Section 4, of Republic Act No. 8249, the institution of the criminal action automatically carries with it the institution of the civil action for the recovery of civil liability, however, in the case at bar, the civil case for the collection of unpaid customs duties and taxes cannot be simultaneously instituted and determined in the same proceedings as the criminal cases before the Sandiganbayan, as it cannot be made the civil aspect of the criminal cases filed before it. It should be borne in mind that the tax and the obligation to pay the same are all created by statute; so are its collection and payment governed by statute.17 The payment of taxes is a duty which the law requires to be paid. Said obligation is not a consequence of the felonious acts charged in the criminal proceeding nor is it a mere civil liability arising from crime that could be wiped out by the judicial declaration of non-existence of the criminal acts charged.18Hence, the payment and collection of customs duties and taxes in itself creates civil liability on the part of the taxpayer. Such civil liability to pay taxes arises from the fact, for instance, that one has engaged himself in business, and not because of any criminal act committed by him.19

Undoubtedly, Republic Act No. 3019 is a special law but since it is silent as to the definition of civil liability, hence, it is only proper to make use of the Revised Penal Code provisions relating to civil liability as a supplement. This is in accordance with the provision of Article 10 of the Revised Penal Code, which make the said Code supplementary to special laws unless the latter should especially provide the contrary.20 Article 104 of the Revised Penal Code enumerates the matters covered by the civil liability arising from crimes, to wit: Article 104. What is included in civil liability. The civil liability established in articles 100, 101, 102 and 103 of this Code includes: 1. Restitution;21 2. Reparation of the damage caused;22 3. Indemnification for consequential damages.23 With the above provision of the Revised Penal Code, it is far-fetched that the civil case for the collection of unpaid customs duties and taxes can be simultaneously instituted with the criminal cases for violation of Section 3(e) and (j) of Republic Act No. 3019 filed before the Sandiganbayan nor can it be made the civil aspect of such criminal cases. All the matters covered by the civil liability in the aforesaid article have something to do with the crimes committed by the wrongdoer. Clearly, the civil liability for violation of any criminal statute, like Republic Act No. 3019, exists because of the criminal act done by the offender. In other words, the civil obligation flows from and is created by the criminal liability,24 thus, the civil liability arising from crimes is different from the civil liability contemplated in the case of taxation. Since the present case took place at the time when Republic Act No. 1125,25 otherwise known as, An Act Creating the Court of Tax Appeals, was still in effect and when the Court of Tax Appeals had no jurisdiction yet over tax collection cases, this case therefore, still falls under the general jurisdiction of the RTC. Section 19(6) of Batas Pambansa Blg. 129, as amended, provides that: Section 19. Jurisdictional in civil cases. Regional Trial Courts shall exercise exclusive original jurisdiction: xxx (6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising jurisdiction of any court, tribunal, person or body exercising judicial or quasijudicial functions; x x x. Consequently, the RTC, not the Sandiganbayan, has jurisdiction over Civil Case No. 02102650. The jurisdiction of the Sandiganbayan is only with respect, among other things, to the criminal cases for violation of Republic Act No. 3019, particularly in this case, Section 3(e) and (j) thereof, but it has no authority to take cognizance of the civil case to collect the unpaid customs duties and taxes of the petitioner. On the second and third issues. Petitioner avers that the Court of Appeals erred in not applying the rule on litis pendentia despite the fact that all its requisites are present in both criminal and civil cases. Petitioner also avows that the institution of the civil case for collection of unpaid

customs duties and taxes was premature since the validity or invalidity of the TCCs was a prejudicial issue that has yet to be resolved with finality by the Sandiganbayan in the Criminal Cases before it. Conversely, the Government claims that in Criminal Cases No. 26168 to 71 filed before the Sandiganbayan, the petitioner was not the party accused, but its corporate officers, whereas in Civil Case No. 02-102650 the party sued is not the corporate officers, but the corporation. Accordingly, there can be no litis pendentia as the requisite of identity of parties was absent. Litis pendentia is a Latin term, which literally means "a pending suit." Litis pendentia as a ground for the dismissal of a civil action refers to that situation wherein another action is pending between the same parties for the same cause of action, such that the second action becomes unnecessary and vexatious. For litis pendentia to be invoked, the concurrence of the following requisites is necessary: (a) identity of parties or at least such as represent the same interest in both actions; (b) identity of rights asserted and reliefs prayed for, the reliefs being founded on the same facts; and (c) the identity in the two cases should be such that the judgment that may be rendered in one would, regardless of which party is successful, amount to res judicata in the other.26 In the case at bar, in Criminal Cases No. 26168 to 71 only the responsible officers of the petitioner are charged in the Information, while in Civil Case No. 02-102650, it is only the corporation that is impleaded, holding it liable for the unpaid customs duties and taxes as a corporate taxpayer. Taxes being personal to the taxpayer, it can only be enforced against herein petitioner because the payment of unpaid customs duties and taxes are the personal obligation of the petitioner as a corporate taxpayer, thus, it cannot be imposed on its corporate officers, much so on its individual stockholders, for this will violate the principle that a corporation has personality separate and distinct from the persons constituting it.27 Having said that, the parties in the two actions are entirely different, hence, petitioner failed to establish the first requisite of litis pendentia as to identity of parties. Going to the second requisite of litis pendentia, this Court finds that the causes of action, as well as the reliefs prayed for in the criminal and civil actions are considerably different. In the criminal cases, the cause of action of the Government, as the Court of Appeals mentioned in its Decision, was founded on the fact that it was defrauded as a result of the alleged conspiracy among the corporate officers of the petitioner and some public officials in the procurement and use of the spurious TCCs, amounting to violation of Section 3(e) and (j) of Republic Act No. 3019. Therefore, the primordial relief sought by the Government is the conviction of the accused for their fraudulent acts. On the contrary, the cause of action in the civil case was established on the basis that since the TCCs were not honored, the customs duties and taxes remain unpaid so the civil action was filed in order to collect the unpaid taxes due to petitioner. The relief sought by the Government in the civil case is the collection of unpaid customs duties and taxes. Thus, the conviction of the accused in the criminal cases and the collection of unpaid taxes in the civil case are totally unrelated causes of action that will not justify the application of the rule on litis pendentia.

As regards the third requisite of litis pendentia, again, the petitioner failed to meet the same. This Court deems it necessary to quote the very wordings of the Court of Appeals in its Decision dated 29 April 2004, as follows: Moreover, a judgment in the criminal cases, to our mind, will not be determinative of the civil case upon which the principle of res judicata will operate. A judgment in the criminal cases will only lead to either conviction or acquittal of the accused officers of the petitioner as the crime only attaches to them but will not in anyway affect the liability of the petitioner as it is a distinct and separate juridical person. Nor do we believe that a finding on the efficacy of the TCCs will change the dire situation in which the Government finds itself in as the tax and the customs duties remain unpaid. The fate of the TCCs for whatever its worth is already fait accompli. It is not disputed by the parties concerned that the subject TCCs have already been cancelled by the [DOF] for which reason the twin suits have been brought. It is on this basis too, that petitioner filed a [C]omplaint for [E]stafa against Devmarks officers before the City Prosecutor of Mandaluyong City. Hence, it is absurd for the petitioner to anchor its complaint on the alleged worthlessness of the TCCs only to argue in the present action that the same must await final determination in the criminal cases before the Sandiganbayan.28 Attention must be given to the fact that taxes are the lifeblood of the nation through which the government agencies continue to operate and with which the State effects its functions for the welfare of its constituents.29It is also settled that taxes are the lifeblood of the government and their prompt and certain availability is an imperious need.30 So then, the determination of the validity or invalidity of the TCCs cannot be regarded as a prejudicial issue that must first be resolved with finality in the Criminal Cases filed before the Sandiganbayan. The Government should not and must not await the result of the criminal proceedings in the Sandiganbayan before it can collect the outstanding customs duties and taxes of the petitioner for such will unduly restrain the Government in doing its functions. The machineries of the Government will not be able to function well if the collection of taxes will be delayed so much so if its collection will depend on the outcome of any criminal proceedings on the guise that the issue of collection of taxes is a prejudicial issue that need to be first resolved before enforcing its collection. Therefore, it is the obligation of the petitioner to make good its obligation by paying the customs duties and taxes, which remain unpaid by reason of the cancellation of the subject TCCs for having been found as fake and spurious. It should not make the Government suffer for its own misfortune. IN VIEW WHEREOF, the instant Petition is hereby DENIED. The Decision as well as the Resolution of the Court of Appeals in CA-G.R. SP No. 77684 dated 29 April 2004 and 2 August 2004, respectively, affirming the Orders of the RTC are hereby AFFIRMED. Costs against petitioner. SO ORDERED. Panganiban, C.J. (Chairperson), Ynares-Santiago, Austria-Martinez, and Callejo, Sr., JJ., concur.

G.R. No. 190487

April 13, 2011

BUREAU OF CUSTOMS, Petitioner, vs. PETER SHERMAN, MICHAEL WHELAN, TEODORO B. LINGAN, ATTY. OFELIA B. CAJIGAL and the COURT OF TAX APPEALS, Respondents. DECISION CARPIO MORALES, J.: Mark Sensing Philippines, Inc. (MSPI) caused the importation of 255, 870,000 pieces of finished bet slips and 205, 200 rolls of finished thermal papers from June 2005 to January 2007. MSPI facilitated the release of the shipment from the Clark Special Economic Zone (CSEZ), where it was brought, to the Philippine Charity Sweepstakes Office (PCSO) for its lotto operations in Luzon. MSPI did not pay duties or taxes, however, prompting the Bureau of Customs (petitioner) to file, under its Run After The Smugglers (RATS) Program, a criminal complaint before the Department of Justice against herein respondents MSPI Chairman Peter Sherman, Managing Director Michael Whelan, Country Manager Atty. Ofelia B. Cajigal and Finance Manager and Corporate Secretary Teodoro B. Lingan, along with Erick B. Ariarte and Ricardo J. Ebuna and Eugenio Pasco, licensed customs broker who acted as agents of MSPI, for violation of Section 36011 vis--vis Sections 2530 (f) and (l) 52 and 101 (f)3 of the Tariff and Customs Code of the Philippines, as amended and Republic Act No. 7916.4 State Prosecutor Rohaira Lao-Tamano, by Resolution of March 25, 2008,5 found probable cause against respondents and accordingly recommended the filing of Information against them. Respondents filed a petition for review6 before the Secretary of Justice during the pendency of which the Information was filed on April 11, 2009 before the Court of Tax Appeals (CTA),7 the accusatory portion of which reads: That on or about June 2005 to December 2007, in Manila City, and within the jurisdiction of this Honorable Court, the above named accused, in conspiracy with one another, made forty (40) unlawful importations of 255, 870 pieces of finished printed bet slips and 205, 200 rolls of finished thermal papers from Australia valued at approximately One Million Two Hundred Forty Thousand Eight Hundred Eighty US Dollars & Fourteen Cents (US$1,240,880.14), and caused the removal of said imported articles from the Clark Special Economic Zone and delivery thereof to the Philippine Charity Sweepstakes Offices without payment of its corresponding duties and taxes estimated at around Fifteen Million Nine Hundred Seventeen Thousand Six Hundred Eleven Pesos and Eighty Three Cents (Php15,917,611.83) in violation of Section 3601 in relation to Sections 2530 and 101 paragraph (f) of the Tariff and Customs Code of the Philippines to the damage and prejudice of herein complainant. CONTRARY TO LAW.8

Only respondents Cajigal and Lingan were served warrants of arrest following which they posted cash bail bonds. By Resolution of March 20, 2009,9 the Secretary of Justice reversed the State Prosecutors Resolution and accordingly directed the withdrawal of the Information. Petitioners motion for reconsideration having been denied by Resolution of April 29, 2009,10 it elevated the case by certiorari before the Court of Appeals, docketed as CA GR SP No. 109431.11 In the meantime, Prosecutor Lao-Tamano filed before the CTA a Motion to Withdraw Information with Leave of Court12 to which petitioner filed an Opposition.13 Respondents, on their part, moved for the dismissal of the Information. The CTA, by the herein assailed Resolution of September 3, 2009,14 granted the withdrawal of, and accordingly dismissed the Information. Petitioners motion for reconsideration filed on September 22, 200915 was Noted Without Action by the CTA by Resolution of October 14, 2009, viz: Considering that an Entry of Judgment was already issued in this case on September 23, 2009, no Motion for Reconsideration of the Resolution dated September 3, 2009 having been filed by State Prosecutor Rohairah Lao-Tamano of the Department of Justice; the "Motion for Reconsideration of the Resolution dated 3 September 2009" filed on September 22, 2009 by Atty. Christopher F.C. Bolastig of the Bureau of Customs isNOTED, without action. SO ORDERED.16 (emphasis partly in the original and partly supplied) Hence, petitioners present petition for certiorari.17 The petition is bereft of merit. It is well-settled that prosecution of crimes pertains to the executive department of the government whose principal power and responsibility is to insure that laws are faithfully executed. Corollary to this power is the right to prosecute violators.18
1avvphi1

All criminal actions commenced by complaint or information are prosecuted under the direction and control of public prosecutors.19 In the prosecution of special laws, the exigencies of public service sometimes require the designation of special prosecutors from different government agencies to assist the public prosecutor. The designation does not, however, detract from the public prosecutor having control and supervision over the case. As stated in the above-quoted ratio of the October 14, 2009 Resolution of the CTA, it noted without action petitioners motion for reconsideration, entry of judgment having been made as no Motion for Execution was filed by the State Prosecutor. By merely noting without action petitioners motion for reconsideration, the CTA did not gravely abuse its discretion. For, as stated earlier, a public prosecutor has control and supervision over

the cases. The participation in the case of a private complainant, like petitioner, is limited to that of a witness, both in the criminal and civil aspect of the case. Parenthetically, petitioner is not represented by the Office of the Solicitor General (OSG) in instituting the present petition, which contravenes established doctrine20 that "the OSG shall represent the Government of the Philippines, its agencies and instrumentalities and its officials and agents in any litigation, proceeding, investigation, or matter requiring the services of lawyers."21 IN FINE, as petitioners motion for reconsideration of the challenged CTA Resolution did not bear the imprimatur of the public prosecutor to which the control of the prosecution of the case belongs, the present petition fails. WHEREFORE, the petition is DISMISSED. SO ORDERED. CONCHITA CARPIO MORALES Associate Justice WE CONCUR: ARTURO D. BRION Associate Justice LUCAS P. BERSAMIN Associate Justice

MARTIN S. VILLARAMA, JR. Associate Justice

MARIA LOURDES P. A. SERENO Associate Justice

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. CONCHITA CARPIO MORALES Associate Justice Chairperson CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the conclusions in the above decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. RENATO C. CORONA Chief Justice

Footnotes Section 3601. Unlawful Importation. Any person who shall fraudulently import or bring into the Philippines, or assist in so doing, any article, contrary to law, or shall receive, conceal, buy, sell or in any manner facilitate the transportation, concealment, or sale of such article after importation, knowing the same to be have been imported contrary to law shall be guilty of smuggling and shall be punished with:
1

xxxx In applying the above scale of penalties, if the offender is an alien and the prescribed penalty is not death, he shall be deported after serving the sentence without further proceedings for deportation. If the offender is a government official or employee, the penalty shall be the maximum as hereinabove prescribed and the offender shall suffer an additional penalty of perpetual disqualification from public office, to vote and to participate in any public election. When upon trial for violation of this section, the defendant is shown to have had possession of the article in question, possession shall be deemed sufficient evidence to authorize conviction unless the defendant shall explain the possession to the satisfaction of the court: Provided, however, That the payment of the tax due after apprehension shall not constitute a valid defense in any prosecution under this section. Section 2530. Property Subject to Forfeiture under Tariff and Customs Laws Any vehicle, vessel or aircraft, cargo, article and other objects shall, under the following conditions be subject to forfeiture:
2

xxxx (f) Any article the importation or exportation of which is effected or attempted contrary to law, or any article of prohibited importation or exportation, and all other articles which, in the opinion of the Collector, have been used, are or were entered to be used as instruments in the importation of exportation of the former: (l) Any article sought to be imported or exported: xxxx 5. Through any other practice or device contrary to law by means of which such

G.R. Nos. 171516-17

February 13, 2009

COMMISSIONER OF CUSTOMS, Petitioner, vs. COURT OF TAX APPEALS, LAS ISLAS FILIPINAS FOOD CORPORATION and PAT-PRO OVERSEAS CO., LTD.,Respondents. RESOLUTION CORONA, J.: Respondent Las Islas Filipinas Food Corporation (LIFFC) owned and operated an industry-specific customs bonded warehouse catering to food manufacturers.1 Among the conditions for its establishment and operations was securing an import allocation from the Sugar Regulatory Administration (SRA) every time it imported sugar for its clients.2 On February 20, 2004, Pat-Pro Overseas Company, Ltd. (PPOC), a Thai company, appointed LIFFC as its "exclusive offshore trading, storage and transfer facility" in the Philippines for its local and foreign transshipment3 operations.4 Pursuant to this appointment, it shipped ten (10) twenty-foot containers of refined sugar to LIFFC. The shipment of refined sugar arrived in Manila on April 24, 2004. Because LIFFC failed to present an import allocation from the SRA, the shipment became subject of Alert Order No. A/IE/20040719101.5 On July 16, 2004, a decree of abandonment was issued due to LIFFCs failure to file an import entry.6 Thereafter, the Collector of Customs issued a warrant of seizure and detention7 on July 27, 2004 in view of the SRAs advice that no import allocation had been granted to LIFFC.8 On August 16, 2004, LIFFC and PPOC (respondents) moved to quash the decree of abandonment.9 However, in an order dated September 21, 2004,10 the motion was denied (for being filed out of time as the decree of abandonment had already attained finality on August 3, 2004).
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Respondents appealed the September 21, 2004 order to the Commissioner of Customs asserting that they were deprived of due process. They alleged that they were never notified of the issuance of the decree of abandonment. After reviewing the evidence on record, the Commissioner found that respondents were not informed of the abandonment proceedings. Thus, in a decision dated February 4, 2005, he set aside the decree of abandonment and ordered the institution of proceedings for seizure and forfeiture.11 Pursuant to the February 4, 2005 decision of the Commissioner, the Republic instituted proceedings for the seizure and forfeiture of respondents importation.12 It contended that, because respondents imported the refined sugar without securing an import allocation from the SRA, the shipment should be forfeited pursuant to Section 2530 (f) and (1)-5 of the Tariff and Customs Code of the Philippines (TCCP).13 Respondents, on the other hand, asserted that the refined sugar was merely transshipped to the Philippines while PPOC was looking for a buyer in the international market. Thus, an import allocation from the SRA was unnecessary.

In decisions dated February 14, 2005 and February 16, 2005, the Collectors held that because LIFFC did not secure an import allocation from the SRA, the shipment was an illegal importation of refined sugar. They ordered its forfeiture in favor of the government.14 On appeal,15 the Commissioner affirmed the decisions of both Collectors.16 On April 15, 2005, respondents appealed to the Court of Tax Appeals (CTA) via petitions for review17contending that the Commissioner erred in affirming the February 14, 2005 and February 16, 2005 decisions of the Collectors.18 They insisted that an import allocation from the SRA was unnecessary inasmuch as the refined sugar was sent to the Philippines only for temporary storage and warehousing and would be shipped eventually to PPOCs final buyer. On April 20, 2005, respondents filed a motion to release cargo for exportation upon filing of a surety bond. The Commissioner opposed the said motion on the basis of Section 2301 of the TCCP which provides: Section 2301. Warrant for Detention of Property-Cash Bond. Upon making any seizure, the Commissioner shall issue a warrant for the detention of the property; and if the owner or importer desires to secure the release of the property for legitimate use, the Collector shall, with the approval of the Commissioner of Customs, surrender it upon the filing of a cash bond, in an amount fixed by him, conditioned upon the payment of the appraised value of the article and/or any fine, expenses and costs which may be adjudged in the case:Provided, That such importation shall not be released under any bond when there is prima facie evidenceof fraud in the importation of the article: Provided, further, That articles the importation of which is prohibited by law shall not be released under any circumstances whatsoever: Provided, finally, That nothing in this section shall be construed as relieving the owner or importer from any criminal liability which may arise from any violation of law committed in connection with the importation of the article. (emphasis supplied) The Commissioner argued that the shipment could not be released inasmuch as respondents had no import allocation from the SRA. Thus, there was prima facie evidence of fraud in the importation of refined sugar. In a resolution dated July 12, 2005, the CTA granted the motion and ordered the release of the shipment subject to LIFFCs filing of a continuing surety bond.19 The Commissioner moved for reconsideration but it was denied.20 The CTA ordered respondents to comply with the July 12, 2005 resolution within 10 days. However, the release of the shipment was held in abeyance for several months as respondents failed to comply with the conditions imposed by the said resolution.21 It was released only on January 6, 200622 when respondents finally complied with all the conditions stated in the July 12, 2005 resolution. On March 1, 2006, the Commissioner filed this petition23 seeking the annulment of the six resolutions (dated July 12, 2005, July 20, 2005, September 27, 2005, November 8, 2005, December 13, 2005 and January 6, 2006) issued in CTA Case Nos. 7198 and 7199.24 On March 20, 2006, we issued a temporary restraining order enjoining the implementation of the said resolutions. The Commissioner basically contends that the CTA committed grave abuse of discretion when it disregarded Section 2301 of the TCCP and ordered the release of respondents shipment of refined sugar.

We grant the petition. Section 2301 of the TCCP states that seized articles may not be released under bond if there is prima facieevidence25 of fraud in their importation. Fraud is a "generic term embracing all multifarious means which human ingenuity can devise and which are resorted to by one individual to secure an advantage and includes all surprise, trick, cunning, dissembling and any unfair way by which another is cheated."26 Since fraud is a state of mind, its presence can only be determined by examining the attendant circumstances. Under Section 1202 of the TCCP,27 importation takes place when merchandise is brought into the customs territory of the Philippines with the intention of unloading the same at port. An exception to this rule is transit cargo28 entered for immediate exportation. Section 2103 of the TCCP provides: Section 2103. Articles Entered for Immediate Exportation. Where an intent to export the article is shown by the bill of lading, invoice, manifest or other satisfactory evidence, the whole or part of a bill (not less than one package) may be entered for immediate exportation under bond. The Collector shall designate the vessel or aircraft in which the articles are laden constructively as warehouse to facilitate the direct transfer of the articles to the exporting vessel or aircraft. Unless it shall appear by the bill of lading, invoice, manifest, or other satisfactory evidence, that the articles arriving in the Philippines are destined for transshipment, no exportation thereof shall be permitted except under entry for immediate exportation under irrevocable domestic letter of credit, bank guaranty or bond in an amount equal to the ascertained duties, taxes and other charges.
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Upon the exportation of the articles, and the production of proof of lading of same beyond the limits of the Philippines, the irrevocable domestic letter of credit, bank guaranty or bond shall be released. For an entry for immediate exportation to be allowed under this provision, the following must concur: (a) there is a clear intent to export the article as shown in the bill of lading, invoice, cargo manifest or other satisfactory evidence; (b) the Collector must designate the vessel or aircraft wherein the articles are laden as a constructive warehouse to facilitate the direct transfer of the articles to the exporting vessel or aircraft; (c) the imported articles are directly transferred from the vessel or aircraft designated as a constructive warehouse to the exporting vessel or aircraft and (d) an irrevocable domestic letter of credit, bank guaranty or bond in an amount equal to the ascertained duties, taxes and other charges is submitted to the Collector (unless it appears in the bill of lading, invoice, manifest or satisfactory evidence that the articles are destined for transshipment). None of the requisites above was present in this case. While respondents insist that the shipment was sent to the Philippines only for temporary storage and warehousing, the bill of lading clearly denominated "South Manila, Philippines" as the port of discharge.29 This not only negated any intent to export but also contradicted LIFFCs representation. Moreover, the shipment was unloaded from the carrying vessel for the purpose of storing the same at LIFFCs warehouse. Importation therefore

took place and the only logical conclusion is that the refined sugar was truly intended for domestic consumption. Furthermore, while respondents insisted that an import allocation was unnecessary, they filed an application, albeit belatedly, in the SRA for the shipment of refined sugar. Respondents web of conflicting statements and actuations undoubtedly proves bad faith, if not outright fraud. All things considered, pursuant to Section 2301 of the TCCP, the shipment of refined sugar should not be released under bond. WHEREFORE, the petition is hereby GRANTED. The July 12, 2005, July 20, 2005, September 27, 2005, November 8, 2005, December 13, 2005 and January 6, 2006 resolutions of the Court of Tax Appeals in CTA Case Nos. 7198 and 7199 are REVERSED and SET ASIDE. The March 20, 2006 temporary restraining order enjoining the implementation of the assailed CTA resolutions is hereby made permanent. The Court of Tax Appeals is ordered to expeditiously decide CTA Case Nos. 7198 and 7199. Costs against respondents Las Islas Filipinas Food Corporation and Pat-Pro Overseas Co., Ltd. SO ORDERED. RENATO C. CORONA Associate Justice WE CONCUR: REYNATO S. PUNO Chief Justice Chairperson ANTONIO T. CARPIO Associate Justice ADOLFO S. AZCUNA Associate Justice

TERESITA J. LEONARDO-DE CASTRO Associate Justice CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above resolution had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice

EN BANC [C.T.A. EB CASE NO. 449. June 15, 2009.] (C.T.A. Case No. 7133) GST PHILIPPINES INCORPORATED, petitioner, vs. COMMISSIONER OF CUSTOMS and SECRETARY OF FINANCE, respondents. DECISION BAUTISTA, J p: The Case Before the Court En Banc is a Petition for Review 1 filed on January 8, 2009, assailing the Decision 2 dated July 17, 2008 of the Second Division of the Court ("Court in Division") in C.T.A. Case No. 7133, ordering petitioner to pay the respondent Commissioner of Customs ("COC") the amount of P1,042,875.00 and P336,549.00, representing additional duties for the shipments covered by Entry Nos. C-26222-00 and C-8511-00, respectively, with legal interest of six percent (6%) per annum from the date of demand up to the finality of the Decision, plus twelve percent (12%) interest per annum from finality of the Decision until its full satisfaction; and the Resolution dated December 3, 2008, denying the "Motion for Reconsideration" of herein petitioner. CTacSE Antecedent Facts The antecedent facts, as narrated by the Court in Division in its Decision, are as follows: "GST Philippines, Inc. 3 (Petitioner) is a domestic corporation duly organized and existing under and by virtue of Philippine laws, with principal office address at the 2nd Floor, ALPAP I Building, 140 L.P. Leviste Street, Salcedo Village, Makati City. It is primarily engaged in the business of manufacturing, processing, erecting, installing, selling, importing, exporting and dealing in all kinds, forms and combinations of iron, steel or other metals, such as, but not limited to, grinding balls, and rods, structural steel, forged steel, cast ferrous metals, mechanical appliances, instruments, any and all kinds of industrial machineries and equipment and any and all processes and products and any and all other analogous or related objects. The Commissioner of Customs 4 (Respondent) is the duly appointed official of the Bureau of Customs whose functions include, among others: (1) the assessment and collection of lawful revenues from imported articles and all other duties, fees, charges, fines, and penalties accruing under the tariff and customs laws; (2) the enforcement of the tariff and customs laws and all other laws, rules and regulations relating to the tariff and customs administration; and (3) the supervision and control of all import and export cargoes, landed or stored in piers, airports, terminal facilities, including container yards and freight stations, for the protection of government revenue. The Secretary of Finance 5 is the duly appointed official of the Department of Finance who exercises full supervision and control over the Bureau of Customs.

On December 12, 1999, a shipment covered by Clean Report of Findings (CRF) No. ITA 800288 R1, was exported from Italy bound for the Philippines and consigned in the name of petitioner (First Shipment). The First Shipment arrived at the Manila International Container Port (MICP) on January 20, 2000. Petitioner paid the duties and taxes based on the declared invoice value of US$450.00/MT for the First Shipment under Entry No. C8511-00. Upon payment of the duties and taxes, the First Shipment was released. DISaEA On March 13, 2000, another shipment covered by CRF No. ITA 035398, was exported from Italy bound for the Philippines, also consigned in the name of petitioner (Second Shipment). The Second Shipment arrived at the MICP on March 23, 2000. Petitioner paid the duties and taxes based on the declared invoice value of US$461.35/MT for the Second Shipment under Entry No. C26222-00. Upon payment of the duties and taxes, the Second Shipment was released. On April 12, 2000, petitioner sent a letter to the Deputy Commissioner of the Bureau of Customs, also the Chairman of the Customs-Socit Gnrale de Surveillance (SGS) Imports Valuation and Classification Committee (Committee) stating that reliance by the Customs Appraiser for the First Shipment on a similar importation covered by CRF No. ITA 028653 is erroneous. On March 23, 2001, petitioner received two (2) demand letters from Buenaventura Maniego, District Collector of Customs, MICP (Collector), dated June 22, 2000 and July 24, 2000, advising it that the Committee has issued two (2) resolutions directing petitioner to pay additional duties and taxes in the amounts of P1,042,875.00 and P336,549.00 for the Second and First Shipments, respectively. In the Demand Letters, the Collector requested petitioner to settle the two amounts within ten (10) days from receipt of the letters; otherwise, the Bureau of Customs would be constrained to institute the necessary legal action to protect the interest of the government. The Collector also stated that should petitioner fail to pay within the ten-day period, petitioner's pending or incoming shipments would be put on hold until such time that its alleged obligation is settled, pursuant to Section 1508 of the Tariff and Customs Code of the Philippines (TCCP). The Resolution of the Committee for the First Shipment provided in part: 'Respectfully referred to the District Collector, MICP Attn.: Chief, Cash Division for his information and guidance is the within copy of the duly approved disposition form of even date, which reflects the findings/resolution of the Customs-SGS Imports Valuation and Classification Committee at its meeting held on 16-17 May 2000, relative to the following case, to wit: xxx RESOLUTION: To apply the previous decision of CRF No. ITA 028653 in absolute value. HEITAD xxx xxx xxx xxx xxx

Covering entry to be reliquidated. In the meantime, other shipments of importer to be put on hold until full payment of duties and taxes due, based on the foregoing resolution. . . . Recommending re-appraisal of said shipment from $450/mt to $1199.84/mt as per approved BOC-SGS Committee Resolution to apply Revision Order No. 11-95 and 5-97 at $1,499.00/mt but less 20% as it represents a third country value but this time it is all the same description and country of origin." On the other hand, the Resolution of the Committee for the Second Shipment provided in part: aCATSI 'Respectfully referred to the District Collector, MICP. Attn.: Chief, Cash Division for his information and guidance is the within copy of the duly approved Disposition Form of even date, which reflects the findings/resolution of the Customs-SGS Imports Valuation and Classification Committee at its meeting held on 4-5 May 2000, relative to the following case, to wit: xxx RESOLUTION: To adopt the appraiser's recommended value at US$1,999.58/mt which was sourced from a previous Committee decision under CRF No. 028653. xxx xxx xxx xxx xxx

Covering entry to be reliquidated. In the meantime, other shipments of importer to be put on hold until full payment of duties and taxes due, based on the foregoing resolution.' On March 30, 2001, respondent Commissioner issued Customs Memorandum Order (CMO) No. 6-2001 which included petitioner in the list of importers whose current and future shipments cannot be released by the Bureau of Customs until their liability for unpaid duties and taxes on previous importations are settled (Hold Order). On April 2, 2001, petitioner sent a letter to the Collector stating that the Customs Appraiser erred in the classification of the Shipments. DcHaET On May 9, 2001, respondent Commissioner sent a letter to petitioner informing the latter that: '. . . the BOC-SGS Appeals Committee has lost its jurisdiction to rule on your request considering that the written resolution thereof has already been forwarded and received by the Collection Division before receipt of your said request. Pursuant to CMO 12-93, Appeals Committee decisions are deemed final and executory upon receipt by the Collection Division of the final resolution. Said resolution adopted the appraiser's recommended value based on RO11-97/5-97 at US$1,999.58/MT and US$1,499/MT but less 20% allowance for being a third country, respectively, which was sourced from a previous Committee decision under CRF No. 028653, as well as the fact that the importer failed to submit any evidence to warrant a change of the questioned resolution.

Considering the foregoing, you may avail of the protest remedy accorded to you under Section 2308 of the Tariff and Customs Code of the Philippines, as amended.' cTCEIS By letter dated January 31, 2002, petitioner elevated the matter to respondent Secretary of the Department of Finance for review of the action taken by the Bureau of Customs on its Shipments, pursuant to Section 38 (1), Chapter 7, Book IV Executive Order No. 292. The request for review was referred back by the then Undersecretary and Chief of Staff Antonio Bernardo to the Bureau of Customs, which in turn referred it to the District Collector, MICP. Meanwhile, Deputy Commissioner Gil A. Valera sent a letter dated September 9, 2003 to petitioner informing the latter that he was directing the Legal Service to resolve the petition contained in the letter dated January 31, 2002 within thirty (30) days. He further stated that he will be recommending petitioner's delisting from the 'Watch List' upon posting of a surety bond. DaEATc On December 21, 2004, petitioner received a letter dated September 30, 2004 from the District Collector informing the former that the Office of the Commissioner had already issued a resolution/decision denying petitioner's request for review of the Committee's decision and petitioner's de-listing from the Hold Order List under CMO No. 6-2001. Hence, the instant Petition for Review filed on January 21, 2005. Respondents filed their Answer on May 9, 2005. After pre-trial, the parties filed their Joint Stipulation of Facts and Issues on July 8, 2005. Petitioner presented its Marketing Manager Wilfredo I. Madridejos and its counsel Manuel Ll. Dionaldo, as witnesses; and Exhibits 'A' to 'R', inclusive of their submarkings, as documentary evidence. The Court admitted all the evidence in Resolutions dated November 16, 2006 and April 13, 2007. Counsel for respondent manifested that she will not present any witness but presented documentary evidence marked as Exhibits '1' to '4', which were all admitted by the Court in a Resolution dated October 5, 2007. cDTHIE After both parties had filed their respective Memorandum, the case was submitted for decision on January 17, 2008. 6 (Citations omitted) The Ruling of the Court in Division The following issues were submitted by the parties for resolution by the Court in Division: "1. Whether petitioner is liable for additional duties and taxes for the First and Second Shipments of forged grinding balls amounting to P336,549.00 and P1,042,875.00, respectively; 2. Whether petitioner's inclusion in the Hold Order List under CMO 6-2001 has legal basis; and DcHSEa

3. Whether the subject upgraded valuation and assessment made by the Customs Appraiser and adopted by the BOC-SGS Appeals Committee is a protestable case within the purview of Sections 2308 and 2309, TCCP." 7 At the outset, the Court in Division resolved the propriety of petitioner's course of action in pursuing the instant case. It ruled that it has no jurisdiction over the case, citing Section 7 of Republic Act No. 1125 ("RA 1125"), as amended by Republic Act No. 9282 ("RA 9282"), in relation to Section 2402 of the Tariff and Customs Code of the Philippines ("TCCP"). DTESIA It explained that in customs cases where a party is adversely affected by a decision of the Collector, such party must observe the procedure provided for in Sections 2308 and 2309 of the TCCP. This is in line with the doctrine of exhaustion of administrative remedies, which requires that resort must first be made to the administrative authorities in cases falling under their jurisdiction to allow them to carry out their functions and discharge their responsibilities within the specialized areas of their competence. Considering that petitioner did not file a written protest setting forth its objections to the tariff classification in the Decision of the Collector, the Court in Division found that the action of the Collector to collect the additional duties has become final and conclusive upon petitioner, which justified its inclusion in the Hold Order List under CMO 6-2001. As a result, the Decision of the Collector could not be elevated to the respondent COC. And since the respondent COC did not render any decision that is appealable to the Court of Tax Appeals, the Court in Division refused to take cognizance of the case, and no longer resolved the remaining issues raised by petitioner. Thus, the Court in Division disposed of the case in this wise: "WHEREFORE, the instant Petition for Review is hereby DISMISSED for lack of merit. Accordingly, petitioner is hereby ORDERED TO PAY respondent the amount of P1,042,875.00 and P336,549.00, representing additional duties for the shipments covered by Entry Nos. C-26222-00 and C-8511-00, respectively, plus legal interest of six percent (6%) per annum from the date of demand up to finality of this Decision. Upon the finality of this Decision, the sum so awarded shall bear an interest at the rate of twelve percent (12%) per annum until its full satisfaction. SO ORDERED." 8 On August 7, 2008, petitioner filed a "Motion for Reconsideration" 9 to which respondents filed their "Comment". 10 On December 3, 2008, the Court in Division denied the "Motion for Reconsideration" for lack of merit. 11 It ruled that: "After a careful examination and comparison of petitioner's Memorandum and the instant Motion, it is here noted that the reasons and arguments raised in the latter are mere reiterations set forth in the former which have already been considered, weighed and resolved in the Court's Decision. The restructuring and further embellishment of language, even with increased dashes or emphasis, do not remove a pleading or motion from the stigma of being pro forma, especially when it is evident that such

reinforcement could just as well have been duly taken advantage of earlier in petitioner's Memorandum. aDcHIC If there were any new matters in petitioner's Motion, they were hardly of any material consequence to the results. Surely, the pro forma nature of said Motion may not be obliterated by new matters that would not anyway significantly alter the result. For instance, reference was made to Section 2303 of the Tariff and Customs Code, by way of analogy, to bolster petitioner's contention that the observance of due process is required. Even if this matter is to be considered new because it was not mentioned in the Memorandum of petitioner, the same had already been sufficiently addressed in the assailed Decision when it was declared that there is no denial of procedural due process. Thus, when a Motion for Reconsideration merely reiterates, in a more or less expanded, different or more embellished form, points, arguments or matters which cannot conceivably alter the result, the said Motion cannot be saved from being declared pro forma." 12 The Issues Hence, the present recourse where petitioner interposes that the Court in Division erred in dismissing the case for the following reasons: "A Petitioner's Motion for Reconsideration is not Pro-Forma. B A written protest under Sections 2308, 2309 and 2312 of the Tariff and Customs Code of the Philippines ('TCCP') is not applicable in the instant case. C Petitioner is not liable for the additional duties and taxes for the First and Second Shipments of forged grinding balls amounting to P336,549.00 and P1,042,875.00, respectively. D The Court of Tax Appeals has jurisdiction over the case at bar, it being an appeal from a decision by the Commissioner of Customs." 13 The Ruling of the Court En Banc The Petition for Review is bereft of merit. As the Court sees it, the crux of the controversy boils down to whether or not the Court has jurisdiction over the instant case.

It is elementary that the Court's appellate jurisdiction is to review the decisions of the COC in any matter brought before the latter "upon protest", as well as in cases involving claims for refund. 14 This is pursuant to Section 7 of RA 9282 and Section 2402 of the TCCP, which provide that: cDHAaT "SEC. 7. Jurisdiction. The CTA shall exercise: (a) xxx Exclusive appellate jurisdiction to review by appeal, as herein provided: xxx xxx

(4) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs; xxx xxx xxx" (Emphasis supplied)

"SEC. 2402. Review by Court of Tax Appeals. The party aggrieved by a ruling of the Commissioner in any matter brought before him upon protest or by his action or ruling in any case of seizure may appeal to the Court of Tax Appeals, in the manner and within the period prescribed by law and regulations. Unless an appeal is made to the Court of Tax Appeals in the manner and within the period prescribed by laws and regulations, the action or ruling of the Commissioner shall be final and conclusive." (Emphasis supplied) Based on the foregoing, the cause of action accrues from the time the COC issues his final decision on the protest made by the taxpayer. 15 However, in order for the COC to acquire jurisdiction over the protest, the pertinent provisions of the TCCP must be followed: "SEC. 2308. Protest and Payment upon Protest in Civil Matters. When a ruling or decision of the Collector is made whereby liability for duties, taxes, fees or other charges are determined, except the fixing of fines in seizure cases, the party adversely affected may protest such ruling or decision by presenting to the Collector at the time when payment of the amount claimed to be due the government is made, or within fifteen (15) days thereafter, a written protest setting forth his objection to the ruling or decision in question, together with the reasons therefor. No protest shall be considered unless payment of the amount due after final liquidation has first been made and the corresponding docket fee, as provided for in Section 3301. ScAHTI SEC. 2309. Protest Exclusive Remedy in Protestable Case. In all cases subject to protest, the interested party who desires to have the action of the Collector reviewed, shall make a protest, otherwise, the action of the Collector shall be final and conclusive against him, except as to matters collectible for manifest error in the manner prescribed in section one thousand seven hundred and seven hereof.

SEC. 2310. Form and Scope of Protest. Every protest shall be filed in accordance with the prescribed rules and regulations promulgated under this section and shall point out the particular decision or ruling, of the Collector to which exception is taken or objection made, and shall indicate with reasonable precision the particular ground or grounds upon which the protesting party bases his claim for relief. The scope of a protest shall be limited to the subject matter of a single adjustment or other independent transaction, but any number of issue may be raised in a protest with reference to the particular item or items constituting the subject matter of the protest. 'Single adjustment', as hereinabove use, refers to the entire content of one liquidation, including all duties, fees, surcharges or fines incident thereto. SEC. 2311. Samples to be Furnished by Protesting Parties. If the nature of the articles permit, importers filing protests involving questions of fact must, upon demand, supply the collector with samples of the articles which are the subject matter of the protest. Such samples shall be verified by the customs official who made the classification against which the protests are filed. SEAHID SEC. 2312. Decision or Action by Collector in Protest and Seizure Cases. When a protest in proper form is presented in a case where protest is required, the Collector shall issue an order for hearing within fifteen (15) days from receipt of the protest and hear the matter thus presented. Upon the termination of the hearing, the Collector shall render a decision within thirty (30) days, and if the protest is sustained, in whole or in part, he shall make the appropriate order, the entry reliquidated necessary. xxx xxx xxx

SEC. 2313. Review of Commissioner. The person aggrieved by the decision or action of the Collector in any matter presented upon protest or by his action in any case of seizure may, within fifteen (15) days after notification on writing by the Collector of his action or decisions, file a written notice to the Collector with a copy furnished to the Commissioner of his intention to appeal the action or decision of the Collector to the Commissioner. Thereupon the Collector shall forthwith transmit all the records of the proceedings to the Commissioner, who shall approve, modify or reverse the action or decision of the Collector and take such steps and make such orders as may be necessary to give effect to his decision: Provided, That when an appeal is filed beyond the period herein prescribed, the same shall be deemed dismissed. xxx xxx xxx."

Pursuant to the said Code, the adverse party aggrieved by the assessment issued by the Collector may question the assessment by filing a written protest; otherwise, the action of the Collector shall become final and unappealable. Thereafter, if the Collector's decision is adverse to the party, the latter can then appeal the matter to the COC, whose decision can be elevated before this Court for review. 16 IATSHE In this case, no formal protest was made before the Collector in accordance with the TCCP, despite the fact that the respondent COC in his letter dated May 9, 2001 17 already informed petitioner that:

". . . the BOC-SGS Appeals Committee has lost its jurisdiction to rule on your request considering that the written resolution thereof has already been forwarded and received by the Collection Division before receipt of your said request. Pursuant to CMO 12-93, Appeals Committee decisions are deemed final and executory upon receipt by the Collection Division of the final resolution. caEIDA Said resolution adopted the appraiser's recommended value based on RO11-97/5-97 at US$1,999.58/MT and US$1,499/MT but less 20% allowance for being a third country, respectively, which was sourced from a previous Committee decision under CRF No. 028653, as well as the fact that the importer failed to submit any evidence to warrant a change of the questioned resolution. Considering the foregoing, you may avail of the protest remedy accorded to you under Section 2308 of the Tariff and Customs Code of the Philippines, as amended." (Emphasis supplied) It bears stressing that a protest is required in matters affecting the legality of the collection under Customs Law of other fees and charges. 18 Failure on the part of petitioner to avail of the correct remedy under the law, renders the Decision of the Collector final and executory. In fact, in the 5th Indorsement dated November 21, 2003, 19 the respondent COC denied petitioner's request to review the Collector's decision, as the said decision has become final and executory. Quoted hereunder is the pertinent portion of the said Indorsement: "xxx xxx xxx

At the outset, it must be informed that there is no pending case before the Legal Service, this Bureau, concerning the said shipments of GST. On the contrary, the subject shipments were held liable for and duly assessed additional taxes and duties in a Decision of the BOC-SGS Import Valuation and Classification Committee (BOC-SGS Committee) for additional duties and taxes amounting to Php1,379,424.00 duly approved by the MICP District Collector. However, instead of filing a protest, which is the remedy provided under the Tariff and Customs Code of the Philippines (TCCP), GST unwarrantedly requested your Office to review the action taken thereon. Consequently, the foregoing BOC-SGS Committee/MICP District Collector's decision became final and executory. xxx xxx xxx"

Since no written protest was made by petitioner, there can be no decision or ruling by the respondent COC, which would require the exercise by this Court of its appellate jurisdiction. The Court need not belabor that to satisfy the jurisdictional requirements of law, the procedure prescribed by the TCCP on protests (Sections 2308-2314 & 2402) in relation to Sections 7 & 11 of RA 1125, as amended by RA 9282, should be followed. Non-compliance with the mandatory procedural requirements would render fatally defective the appeal and would thereby result to its dismissal. 20 Relevant to this case is the ruling in the case of Armovit v. The Commissioner of Customs, 21 to wit: "As no formal protest was made before the Collector of Customs who made the ruling on the liability in accordance with the above law and prescribed rules and regulations, the action of the Collector has become final and conclusive against the petitioner. This incontrovertible fact that no protest was filed is

confirmed by a certification issued by the Chief of the Legal Division, MICP, that 'no protest was filed by the consignee RAYMUNDO A. ARMOVIT, relative to the shipment of one (1) unit Mercedes Benz SD Turbo, 1982 Model, 4-door, 5 cylinder, Chassis No. WDB 12612012030719'. (Exh. G, p. 98, CTA records). Failure on the part of petitioner to file a formal protest as required by law was fatal to his cause. The decision of the Collector has already become final and conclusive. It had the primary and exclusive jurisdiction to rule on the tax liability and duties on the vehicle in question. It constitutes a tribunal upon which the law confers jurisdiction to hear and determine all questions touching on the assessment and further disposition on the matter (cf. Papa vs. Mago, 22 SCRA 857 1968). Having failed therefore to register his protest as required by law to take exception to the ruling made by the Collector on his liability for duties, taxes and other charges which was formally communicated to the petitioner, he lost the opportunity to contest said assessment (See Silver Swan Mfg. Co., Inc. vs. Commissioner of Customs C.T.A. Case [RES] No. 744, June 29, 1960, affd. in G.R. No. L-17435, June 29, 1963, 8 SCRA 400). Likewise, petitioner failed to observe the principle of exhaustion of the administrative remedies provided by law. As impliedly stated in the case of Rufino Lopez and Sons, Inc. vs. Court of Tax Appeals, 100 Phil. 850 and restated in the case of Sampaguita Shoe and Slipper Factory vs. Commissioner of Customs, 102 Phil. 850, the doctrine of exhaustion of administrative remedies is a condition sine qua non before one resort to Courts because it is a sound rule for 'it provides for a policy of orderly procedure which favors to preliminary administrative sifting process, and serves to prevent attempts to swamp the courts by a resort to them in the first instance.' SAHITC In addition, it has been ruled by our Supreme Court in the case of Ysmael vs. Deputy Executive Secretary, et al., G.R. No. 79538, October 18, 1990, that: It is an established doctrine in this jurisdiction that the decisions and orders of administrative agencies have upon their finality, the force and binding effect of a final judgment within the purview of the doctrine of res judicata. These decisions and orders are as conclusive upon the rights of the affected parties as though the same had been rendered by a court of general jurisdiction. The rule of res judicata thus forbids the reopening of a matter once determined by competent authority acting within their exclusive jurisdiction (also Brilliantes vs. Castro, 99 Phil. 497 [1956]; Ipekdjian Merchandising Co., Inc. vs. Court of Tax Appeals, G.R. No. L-15430, September 30, 1963, 9 SCRA 72; San Luis vs. Court of Appeals, G.R. No. 80160, June 26, 1989). The act of Petitioner in raising his protest directly to the Commissioner of Customs as stated in his letter of August 10, 1990, is violative of this principle of exhaustion of Administrative remedies. It may not be amiss to state that the grounds raised by the petitioner before this Court could have been properly ventilated in the formal protest which he should have filed before the Collector of Customs. Petitioner did not avail of its remedies under the law. This Court therefore is in no position to reopen the matter which has already been finally decided by the competent authority acting within its exclusive jurisdiction." (Emphasis supplied) Finding that the Court has no jurisdiction to take cognizance of the instant controversy, it becomes unnecessary to resolve the other issues raised by petitioner.

WHEREFORE, the instant Petition for Review is hereby DISMISSED. Accordingly, the Decision dated July 17, 2008 and the Resolution dated December 3, 2008 are hereby AFFIRMED. EIDaAH SO ORDERED. (SGD.) LOVELL R. BAUTISTA Associate Justice Ernesto D. Acosta, P.J., Juanito C. Castaeda, Jr., Erlinda P. Uy, Caesar A. Casanova and Olga PalancaEnriquez, JJ., concur. Footnotes 1. Rollo, C.T.A. EB No. 449 (C.T.A. Case No. 7133), pp. 9-66 with Annexes.

2. Penned by Associate Justice Juanito C. Castaeda, Jr., and concurred in by Associate Justices Erlinda P. Uy and Olga Palanca-Enriquez. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Herein Petitioner. Herein Respondent. Herein Respondent. Rollo, pp. 50-56. Id., p. 57. Rollo, p. 62. Records, C.T.A. No. 7133, pp. 550-572. Id., pp. 577-584. Rollo, pp. 64-66. Id., pp. 65-66. Rollo, p. 21. Sol Oil, Inc. v. The Commissioner of Customs, C.T.A. Case No. 4407, June 9, 1994.

15. Philippine Clearing House Corporation v. The Commissioner of Customs, C.T.A. Case No. 4339, February 4, 1994. 16. 17. Philippine Clearing House Corporation v. The Commissioner of Customs, supra, at note 15. Records, p. 290, Exhibit "G".

18. Solid Mills, Inc., et al. v. Commissioner of Customs, C.T.A. Case No. 2995, November 28, 1980; citing Luzon Stevedoring Corporation v. Court of Tax Appeals and Commissioner of Customs, L-21005, October 22, 1966, 18 SCRA 436; Victorias Milling Co., Inc. v. Auditor General, L-17414, November 30, 1962, 6 SCRA 822. 19. Records, pp. 310-311, Exhibits "M-4 and M-5".

20. Chemphil Manufacturing Corporation v. Commissioner of Internal Revenue and Commissioner of Customs, C.T.A. Case No. 3891, November 27, 1986. 21. C.T.A. Case No. 4578, January 21, 1994.

G.R. No. 160270

April 23, 2010

SUBIC BAY METROPOLITAN AUTHORITY, Petitioner, vs. MERLINO E. RODRIGUEZ and WIRA INTERNATIONAL TRADING CORP., both represented herein by HILDA M. BACANI, as their authorized representative, Respondents. DECISION CARPIO, J.: The Case This is a petition for review1 of the Court of Appeals (CA) Decision2 dated 20 June 2003 and Resolution dated 8 October 2003 in CA-G.R. SP No. 74989. The CA dismissed the petition for certiorari and prohibition3 with prayer for temporary restraining order, preliminary or permanent injunction filed by Subic Bay Metropolitan Authority (SBMA) against Judge Ramon S. Caguioa of the Regional Trial Court (RTC) of Olongapo City, Branch 74, and Merlino E. Rodriguez and Wira International Trading Corporation (WIRA), both represented by Hilda Bacani. The CA also affirmed the Orders dated 21 November 2002 and 27 November 2002 issued by the RTC. The Antecedent Facts The factual and procedural antecedents of this case, as culled from the records, are as follows:

On 29 September 2001, a cargo shipment described as "agricultural product" and valued at US$6,000 arrived at the Port of Subic, Subic Bay Freeport Zone.4 On the basis of its declared value, the shipment was assessed customs duties and taxes totaling P57,101 which were paid by respondent WIRA, the shipments consignee.5 On 23 October 2001, Raval Manalas, Acting COO III of the Bureau of Customs, Port of Subic (BOC Subic Port), issued a Memorandum addressed to the BOC Subic Port District Collector, stating that upon examination, the subject shipment was found to contain rice. The Memorandum further stated as follows: that the importer claimed there was a misshipment since it also had a pending order for rice; that the "warehousing entry" was amended to reflect the change in description from "agricultural product" to rice; that the shipment, as a warehoused cargo inside the freeport zone, was duty and tax free, and was not recommended for any imposition of penalty and surcharge; that the consumption entry was changed to reflect a shipment of rice; and that the consumption entry, together with supporting documents belatedly received by the importer, was submitted to the bank although not yet filed with the BOC.6 On 24 October 2001, Hilda Bacani (respondents authorized representative) wrote BOC Subic Port District Collector Billy Bibit, claiming that she was the representative of Metro Star Rice Mill (Metro Star), the importer of the subject cargo. She stated that there was a "misshipment" of cargo which actually contained rice, and that Metro Star is an authorized importer of rice as provided in the permits issued by the National Food Authority (NFA). Bacani requested that the "misshipment" be upgraded from "agricultural product" to a shipment of rice, and at the same time manifested willingness to pay the appropriate duties and taxes.7 The following day, or on 25 October 2001, the BOC issued Hold Order No. 14/C1/2001 1025-101, directing BOC Subic Port officers to (1) hold the delivery of the shipment, and (2) to cause its transfer to the security warehouse.8 On 26 October 2001, respondent WIRA, as the consignee of the shipment, paid the amount of P259,874 to the BOC representing additional duties and taxes for the upgraded shipment.9 On 30 October 2001, BOC Commissioner Titus Villanueva issued a directive stating as follows:10 2nd Indorsement 30 October 2001 Returned to the District Collector of Customs, Port of Subic, the within (sic) Import Entry No. C 2550-01 covering the shipment of 2,000 bags Thai Rice 25% broken consigned to WIRA INTL TRADING CORPORATION (METRO STAR RICE MILL) ex MV Resolution V0139 with NFA Import Permit IP SN 000032 and IP SN 000033 both dated on 13 September 2001 duly issued by the Administrator, National Food Authority. Accordingly, the same may be released subject to payment of duties and taxes based on an upgraded value as provided for by the National Food Authority at $153.00/MT and compliance with all existing rules and regulations. Further, ensure cancellation of NFA Import Permit IP SN 000032 and IP SN 000033, to prevent the same from being recycled. Report to this office your compliance of herein directives.

Be guided accordingly. (Sgd.) Titus Villanueva, CESO 1 Commissioner In accordance with the shipment upgrade, respondent WIRA paid on 28 November 2001 a further amount ofP206,212 as customs duties and taxes.11 On 4 December 2001, Fertony G. Marcelo, Officer-in-Charge of the Cash Division of BOC Subic Port issued a certification/letter addressed to Mr. Augusto Canlas, General Manager of the Seaport Department, stating thus:12 This is to certify that the undersigned Collecting Officer validate[d] a revenue of Php 523,187.00 from above-mentioned importation13 covered by O.R. Numbers 8083840 dated October 23, 2001, 8084068 dated October 26, 2001 and 8165208 dated November 28, 2001, respectively. And a Gate Pass was issued on December 3, 2001 with signature of Mr. Percito V. Lozada, Chief Assessment in behalf of the District Collector Billy C. Bibit. (Sgd.) Fertoni G. Marcelo Officer-in-charge, Cash Division (Collecting Officer) Noted: (Sgd. For) Coll. Billy C. Bibit Despite the above certification/letter, petitioner SBMA, through Seaport Department General Manager Augusto Canlas, refused to allow the release of the rice shipment. Hence, on 11 June 2002, respondents filed with the RTC of Olongapo City, a complaint for Injunction and Damages with prayer for issuance of Writ of Preliminary Prohibitory and Mandatory Injunction and/or Temporary Restraining Order against petitioner SBMA and Augusto L. Canlas, and the case was docketed as Civil Case No. 261-0-2002. The succeeding events were summarized by the trial court and reproduced by the Court of Appeals, as follows:14 1. On June 11, 2002, a complaint for Injunction and Damages with prayer for issuance of Writ of Preliminary Prohibitory and Mandatory Injunction and/or Temporary Restraining Order was filed by the plaintiff/petitioners Mernilo E. Rodriguez, doing business under the name and style "Metro Star Rice Mill," represented by Attorney-in-fact Hilda M. Bacani, and WIRA International Trading, Inc. likewise represented by Hilda M. Bacani as authorized representative, against Subic Bay Metropolitan Authority (SBMA) and Augusto L. Canlas, in his personal and official capacity as General Manager of the Seaport Department of said SBMA. The complaint was docketed as Civil Case No. 2610-[2002]. 2. On June 13, 2002, an Order was issued by the Executive Judge of the Regional Trial Court of Olongapo City, Branch 72, where plaintiffs/petitioners application for injunctive relief was granted. Said order restrained the defendants/respondents for seventy-two (72) hours, from interfering with plaintiffs/petitioners right to enter the premises of the CCA compound located within the Bureau of Customs territory and authority within the Subic Bay Freeport Zone (SBFZ), Olongapo City, and to withdraw and release from said

CCA warehouse the rice importation of plaintiffs and to take and possess the said imported rice consisting of 2,000 bags; and from interfering in any manner whatsoever with plaintiffs/petitioners rights and possession over the aforesaid imported rice. On the same day also, June 13, 2002, the raffle of the case was set on June 18, 2002 at 8:30 in the morning. 3. Copy of the complaint with summons together with aforesaid Temporary Restraining Order (TRO) was served by Sheriff Leopoldo Rabanes and Leandro Madarang of the Office of the Clerk of Court of the Regional Trial Court, Olongapo City, upon the defendants/respondents on the same day, June 13, 2002, at around 3:40 in the afternoon as shown by the Sheriff's return of service (Exh. "A-3" and Exh. "B-1") typed and found in the same pleadings. 4. The following day, on June 14, 2002, the same Sheriffs went back to defendants/respondents' office to determine whether or not the TRO issued by Branch 72 and served by them was followed. They were however, met by defendants/respondents Attys. Abella and Katalbas, in the office of defendant/respondent Canlas, who after much discussion, refused to honor the TRO issued by Branch 72 alleging among other[s], that said Order was illegal and therefore, will not be followed by the defendants/respondents. 5. Unsuccessful in their efforts, the Sheriffs of this Court prepared and filed their report dated June 17, 2002 outlining therein what transpired on June 14, 2002 and the circumstances surrounding the refusal by defendants/respondents to honor the TRO issued by Branch 72-RTC, Olongapo City (Exh. "C"). On the same day also, June 17, 2002, plaintiffs/petitioners-movants filed in the instant case a verified indirect contempt charge alleging therein that because of the defiance exhibited by the defendants/respondents[,] specifically Augusto L. Canlas, Attys. Francisco A. Abella, Jr. and Rizal V. Katalbas. Jr.[,] in not honoring the court's TRO, they prayed that said defendants/respondents, after due notice and hearing, be declared and adjudged guilty of indirect contempt committed against the court for having directly failed and refused to comply with the TRO dated June 13, 2002, and that they be punished with imprisonment and/or fine in accordance with Rule 71 of the 1997 Rules of Civil Procedure. 6. On June 18, 2002, the case was raffled to Branch 74 of herein court.15 7. On June 24, 2002, a comment and/or opposition to the verified indirect contempt charge was filed by the defendants/respondents alleging therein that they cannot be cited for contempt of court because they had legal basis to refuse to honor the TRO.

1avv phi 1

8. Trial was conducted by the court in the indirect contempt charge on July 12, 2002 as per the courts Order of even date. Plaintiffs/petitioners presented Sheriff Leopoldo Rabanes who testified on direct examination. During the August 20, 2002 hearing, Sheriff Rabanes was cross-examined. Thereafter, the testimony of his co-Sheriff Leandro Madarang was stipulated upon the parties considering that his testimony would only corroborate in all principal points the testimony of Sheriff Rabanes. 9. On that same hearing also[,] plaintiffs/petitioners formally offered their evidence and rested. Defendants/respondents[,] however, in the meantime had earlier filed a motion on August 1, 2002[,] asking leave of court to file a motion to dismiss with attached

"Motion to Dismiss" and in the said August 20, 2002 hearing, defendants/respondents further manifested that they were adopting their legal arguments marshalled in the said motion to dismiss insofar as the indirect contempt charge was concerned. 10. Thereafter, on August 29, 2002, defendants/respondents filed a manifestation with formal offer of evidence in the indirect contempt case essentially alleging that it is the Bureau of Customs that has jurisdiction over this case in view of a Warrant of Seizure and Detention case filed against the plaintiff/petitioners and denominated as Seizure Identification No. 200[2]-10. Therefore, since it is the Bureau of Customs that has jurisdiction, the indirect contempt case has no legal leg to stand on and as such, defendants/respondents had the right to refuse to comply with the subject TRO in this case. 11. With the said formal offer of exhibits filed by the defendants/respondents, the indirect contempt case was considered submitted for decision by this court. In addition to the foregoing, on 19 July 2002, petitioner SBMA and Augusto Canlas filed their Answer to the Complaint for Injunction and Damages with Counterclaim.16 On 1 August 2002, petitioner SBMA, Augusto Canlas, Francisco A. Abella, Jr. and Rizal V. Katalbas, Jr. filed a Consolidated Motion to Dismiss which sought the dismissal of (1) Civil Case No. 261-0-2002 (Complaint for Injunction and Damages) and (2) Civil Case No. 262-0-2002 (Petition for Indirect Contempt), alleging the existence of a Warrant of Seizure and Detention, dated 22 May 2002, issued against the subject rice shipment.17 On 21 November 2002, the RTC issued an Order on the indirect contempt case, stating thus: WHEREFORE, foregoing considered, judgment is hereby rendered finding all of the defendants/respondents guilty of indirect contempt of court. Atty. Francisco A. Abella, Jr. is sentenced to suffer the penalty of imprisonment of ten (10) days and fined the amount of P10,000.00 Atty. Rizal V. Katalbas, Jr. is sentenced to pay a fine of P10,000.00. Augusto L. Canlas is sentenced to pay a fine of P5,000.00. Subsidiary imprisonment in case of insolvency for all. Let a warrant of arrest issue against Atty. Francisco A. Abella, Jr. The Clerk of Court, Atty. John V. Aquino, of the Regional Trial Court, Olongapo City is directed to collect the corresponding fine from each of the respondents immediately upon receipt of this order and to report the same to the court. SO ORDERED.18 On 27 November 2002, the RTC issued another Order considering the pending incidents in the injunction case. The RTC held that there should be prior determination by the BOC on whether the 2,000 bags of imported rice were smuggled, and thus issued the following order: WHEREFORE, the Bureau of Customs, Customs District XIII, Port of Subic, Olongapo City through Atty. Titus A. Sangil, Chief, Law Division and Deputy Collector for Administration is hereby directed to resolve Seizure Identification Case No. 2002-10 and submit to the court its resolution therewith, within fifteen (15) days from receipt of this order. Meantime, the proceedings in this case are suspended until the court is in receipt of the resolution of the Bureau of Customs.

Furnish a copy of this order to Atty. Titus A. Sangil at his abovecited office address. SO ORDERED.19 The Court of Appeals Ruling Petitioner filed with the CA a Petition for Certiorari and Prohibition with prayer for Temporary Restraining Order and Preliminary or Permanent Injunction seeking to nullify and set aside the RTC Orders dated 21 November 2002 and 27 November 2002. On 20 June 2003, the CA rendered a Decision dismissing the petition for lack of merit and affirming the Orders issued by the RTC. We quote the dispositive portion of the CA decision below. WHEREFORE, premises considered, the assailed Orders dated November 21, 2002 and November 27, 2002 are hereby AFFIRMED in toto and the present petition is hereby DENIED DUE COURSE and accordingly DISMISSED for lack of merit. SO ORDERED.20 Petitioners Motion for Reconsideration was denied by the CA in its Resolution of 8 October 2003.21 Hence, this appeal. The Issue The issue for resolution in this case is whether the CA erred in affirming the RTC Orders dated 21 November 2002 and 27 November 2002. The Courts Ruling We find the appeal meritorious. As a rule, actions for injunction and damages lie within the jurisdiction of the RTC pursuant to Section 19 of Batas Pambansa Blg. 129 (BP 129), otherwise known as the "Judiciary Reorganization Act of 1980," as amended by Republic Act (RA) No. 7691.22 An action for injunction is a suit which has for its purpose the enjoinment of the defendant, perpetually or for a particular time, from the commission or continuance of a specific act, or his compulsion to continue performance of a particular act.23 It has an independent existence, and is distinct from the ancillary remedy of preliminary injunction which cannot exist except only as a part or an incident of an independent action or proceeding.24 In an action for injunction, the auxiliary remedy of preliminary injunction, prohibitory or mandatory, may issue. 25 Until the propriety of granting an injunction, temporary or perpetual, is determined, the court (i.e., the RTC in this case) may issue a temporary restraining order. 26A TRO is an interlocutory order or writ issued by the court as a restraint on the defendant until the propriety of granting an injunction can be determined, thus going no further in its operation than to preserve the status quo until that determination.27 A TRO is not intended to operate as an injunction pendente lite,

and should not in effect determine the issues involved before the parties can have their day in court.28 Petitioner alleges that the RTC of Olongapo City has no jurisdiction over the action for injunction and damages filed by respondents on 11 June 2002 as said action is within the exclusive original jurisdiction of the BOC pursuant to Section 602 of Republic Act No. 1937, otherwise known as the "Tariff and Customs Code of the Philippines," as amended. Section 602 provides, thus: Sec. 602. Functions of the Bureau.- The general duties, powers and jurisdiction of the bureau shall include: xxx g. Exercise exclusive original jurisdiction over seizure and forfeiture cases under the tariff and customs laws. Petitioner contends that the imported 2,000 bags of rice were in the actual physical control and possession of the BOC as early as 25 October 2001, by virtue of the BOC Subic Port Hold Order of even date, and of the BOC Warrant of Seizure and Detention dated 22 May 2002. As such, the BOC had acquired exclusive original jurisdiction over the subject shipment, to the exclusion of the RTC. We agree with petitioner. It is well settled that the Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings, and regular courts cannot interfere with his exercise thereof or stifle or put it at naught.29 The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods.30 Regional trial courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the BOC and to enjoin or otherwise interfere with these proceedings.31 Regional trial courts are precluded from assuming cognizance over such matters even through petitions for certiorari, prohibition or mandamus.32 Verily, the rule is that from the moment imported goods are actually in the possession or control of the Customs authorities, even if no warrant for seizure or detention had previously been issued by the Collector of Customs in connection with the seizure and forfeiture proceedings, the BOC acquires exclusive jurisdiction over such imported goods for the purpose of enforcing the customs laws, subject to appeal to the Court of Tax Appeals whose decisions are appealable to this Court.33 As we have clarified in Commissioner of Customs v. Makasiar, 34 the rule that RTCs have no review powers over such proceedings is anchored upon the policy of placing no unnecessary hindrance on the government's drive, not only to prevent smuggling and other frauds upon Customs, but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform. Based on the records of this case, the BOC Subic Port issued a Hold Order against the subject rice shipment on 25 October 2001. However, on 30 October 2001, BOC Commissioner Titus Villanueva issued a directive to the BOC District Collector stating that the shipment "may be released subject to payment of duties and taxes based on an upgraded value x x x and

compliance with all existing rules and regulations." Accordingly, respondents made additional payments of customs duties and taxes for the upgraded shipment. Consequently, on 4 December 2001, the Officer-in-Charge of the BOC Subic Port Cash Division issued a certification/letter addressed to Augusto Canlas, the General Manager of the Subic Seaport Department, stating that respondents have already paid the customs taxes and duties due on the shipment, and "a Gate Pass was issued on December 3, 2001 with signature of Mr. Percito V. Lozada, Chief Assessment (sic) in behalf of the District Collector Billy C. Bibit." 35 Thus, the Hold Order previously issued by the BOC36 had been superseded, and made ineffective, by the succeeding BOC issuances.
1avvphi1

However, BOC Subic Port District Collector Felipe A. Bartolome subsequently issued a Warrant of Seizure and Detention dated 22 May 2002 against the subject rice shipment. The warrant was issued upon recommendation made by Atty. Baltazar Morales of the Customs Intelligence and Investigation Service (CIIS) on 29 April 2002.37 With the issuance of the warrant of seizure and detention, exclusive jurisdiction over the subject shipment was regained by the BOC. We note that the appellate court found suspicious the existence of the warrant of seizure and detention at the time of filing of the injunction and damages case with the RTC by respondents. The CA pointed out that petitioner did not mention the existence of the warrant in its Answer to the Complaint for Injunction and Damages, filed on 19 July 2002, and only mentioned the warrant in its Consolidated Motion to Dismiss [the Complaint for Injunction and Damages, and the Petition for Indirect Contempt], filed on 1 August 2002.38 We do not agree with the appellate court. Petitioner's apparent neglect to mention the warrant of seizure and detention in its Answer is insufficient to cast doubt on the existence of said warrant. Respondents filed a case for indirect contempt against Augusto L. Canlas, Atty. Francisco A. Abella, Jr., and Atty. Rizal V. Katalbas, Jr. for allegedly defying the TRO issued by the RTC in connection with the complaint for injunction and damages previously filed by respondents. Contempt constitutes disobedience to the court by setting up an opposition to its authority, justice and dignity.39 It signifies not only a willful disregard or disobedience of the court's orders but such conduct as tends to bring the authority of the court and the administration of law into disrepute or in some manner to impede the due administration of justice.40 There are two kinds of contempt punishable by law: direct contempt and indirect contempt. Direct contempt is committed when a person is guilty of misbehavior in the presence of or so near a court as to obstruct or interrupt the proceedings before the same, including disrespect toward the court, offensive personalities toward others, or refusal to be sworn or to answer as a witness, or to subscribe an affidavit or deposition when lawfully required to do so.41 Indirect contempt or constructive contempt is that which is committed out of the presence of the court.42 Section 3 of Rule 71 of the Revised Rules of Civil Procedure includes, among the grounds for filing a case for indirect contempt, the following: Section 3. Indirect contempt to be punished after charge and hearing. After charge in writing has been filed, and an opportunity given to the accused to be heard by himself or counsel, a person guilty of any of the following acts may be punished for contempt: xxx

(b) Disobedience of or resistance to a lawful writ, process, order, judgment or command of a court, or injunction granted by a court or judge, x x x (c) Any abuse of or any unlawful interference with the process or proceedings of a court not constituting direct contempt under Section 1 of this rule; (d) Any improper conduct tending, directly or indirectly, to impede, obstruct or degrade the administration of justice; xxx When the TRO issued by the RTC was served upon the SBMA officers on 13 June 2002, there was already an existing warrant of seizure and detention (dated 22 May 2002) issued by the BOC against the subject rice shipment. Thus, as far as the SBMA officers were concerned, exclusive jurisdiction over the subject shipment remained with the BOC, and the RTC had no jurisdiction over cases involving said shipment. Consequently, the SBMA officers refused to comply with the TRO issued by the RTC. Considering the foregoing circumstances, we believe that the SBMA officers may be considered to have acted in good faith when they refused to follow the TRO issued by the RTC. The SBMA officers' refusal to follow the court order was not contumacious but due to the honest belief that jurisdiction over the subject shipment remained with the BOC because of the existing warrant of seizure and detention against said shipment. Accordingly, these SBMA officers should not be held accountable for their acts which were done in good faith and not without legal basis. Thus, we hold that the RTC Order dated 21 November 2002 which found the SBMA officers guilty of indirect contempt for not complying with the RTC's TRO should be invalidated. Finally, the RTC stated in its Order dated 27 November 2002 that based on the records, "there is a pending case with the Bureau of Customs District XIII, Port of Subic, Olongapo City, identified and docketed as Seizure Identification No. 2002-10 and involving the same 2,000 bags of imported rice that is also the subject matter of the case herein. The existence and pendency of said case before the Bureau of Customs have in fact been admitted by the parties."43 The RTC then proceeded to order the suspension of court proceedings, and directed the BOC Subic Port Chief of the Law Division and Deputy Collector for Administration, Atty. Titus Sangil, to resolve the seizure case and submit to the RTC its resolution within fifteen (15) days from receipt of the court order. We quote the dispositive portion of the RTC Order dated 27 November 2002, to wit: WHEREFORE, the Bureau of Customs, Customs District XIII, Port of Subic, Olongapo City through Atty. Titus A. Sangil, Chief, Law Division and Deputy Collector for Administration is hereby directed to resolve Seizure Identification Case No. 2002-10 and submit to the court its resolution therewith, within fifteen (15) days from receipt of this order. Meantime, the proceedings in this case are suspended until the court is in receipt of the resolution of the Bureau of Customs. Furnish a copy of this order to Atty. Titus A. Sangil at his abovecited office address.44

We find the issuance of the RTC Order dated 27 November 2002 improper. The pendency of the BOC seizure proceedings which was made known to the RTC through petitioner's consolidated motion to dismiss should have prompted said court to dismiss the case before it. As previously discussed, the BOC has exclusive original jurisdiction over seizure cases under Section 602 of the Tariff and Customs Code. The rule that the RTC must defer to the exclusive original jurisdiction of the BOC in cases involving seizure and forfeiture of goods is absolute. Thus, the RTC had no jurisdiction to issue its Order dated 27 November 2002. WHEREFORE, we GRANT the petition. We REVERSE the Court of Appeals Decision dated 20 June 2003 and Resolution dated 8 October 2003 in CA-G.R. SP No. 74989. We declare VOID the Regional Trial Court Orders dated 21 November 2002 and 27 November 2002. SO ORDERED. ANTONIO T. CARPIO Associate Justice WE CONCUR: PRESBITERO J. VELASCO, JR. Associate Justice ARTURO D. BRION Associate Justice ROBERTO A. ABAD Associate Justice

JOSE PORTUGAL PEREZ Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ANTONIO T. CARPIO Associate Justice Chairperson

EN BANC [C.T.A. EB CASE NO. 471. July 29, 2009.] (C.T.A. CASE NO. 7782)

RUBILLS INTERNATIONAL, INC. and FIL HAUS ENTERPRISES, represented by LEANDRO ANTONIO TALAUE, petitioners, vs. CUSTOMS COMMISSIONER NAPOLEON L. MORALES, DISTRICT COLLECTOR HORACIO D. SUANSING, JR., ATTY. TRISTAN ARMANDO III F. LANGKAY, AND ATTY. ROGEL GATCHALIAN, respondents. DECISION UY, J p: This is a Petition for Review before the Court of Tax Appeals En Banc filed on March 12, 2009 under Republic Act (RA) No. 1125, as amended by Republic Act (RA) No. 9282, and Section 2 (a), Rule 4 of the Revised Rules of the Court of Tax Appeals, seeking a review of the Resolutions by the First Division of this Court (Court in Division) 1 which dismissed CTA Case No. 7782, entitled "Rubills International, Inc. and Fil Haus Enterprises, represented by Leandro Antonio P. Talaue, petitioners, vs. Customs Commissioner Napoleon L. Morales, District Collector Horacio D. Suansing, Jr., Atty. Tristan Armando III F. Langkay, Atty. Rogel Gatchalian, respondents", to wit: CSIHDA 1) Resolution promulgated on September 29, 2008 2 dismissing the case for lack of jurisdiction considering that petitioners' immediate resort to judicial action is unjustified as there is in fact an adequate and speedy remedy available to petitioner; and 2) Resolution promulgated on February 11, 2009 3 denying herein petitioner's Motion for Reconsideration of the aforesaid Resolution for being pro forma. THE FACTS Based on the records, the factual antecedents of the case are as follows: Petitioners are Rubills International, Inc. and Fil Haus Enterprises, the former being a corporation duly organized and existing under the laws of the Republic of the Philippines, while the latter is a single proprietorship duly represented by Mr. Leandro Antonio Talaue, both with principal office at Room 603, S & L Building, 1500 Roxas Boulevard, Manila. Respondents, on the other hand, are Customs Commissioner Napoleon L. Morales, District Collector Horacio D. Suansing, Jr., Atty. Tristan Armando III F. Langkay, and Atty. Rogel Gatchalian. AHECcT On April 15, 2008, an Order was issued by the District Collector of the Port of Manila, Horacio D. Suansing, Jr., ordering the forfeiture in favor of the Government the subject importation shipments of flour by petitioners. 4 On April 24, 2008, petitioners filed their "Motion for Reconsideration and/or Appeal" 5 of the said Order, but said motion for reconsideration was denied in another Order dated April 30, 2008 issued again by District Collector Horacio D. Suansing, Jr. 6 On May 6, 2008, petitioners judicially appealed the aforesaid Orders issued by the Collector of Customs, through a Petition for Review, 7 before the Court in Division, alleging further that the issuance of a Writ of Preliminary Injunction and/or grant of Temporary Restraining Order (TRO) is proper to prevent the

auction sale of petitioners' subject shipments. On same date, summons 8 was issued requiring respondents to file their answer thereto. aSTAcH During the hearing on May 16, 2008, the Court in Division ruled that the motion for the issuance of TRO has been rendered moot considering that the subject shipments were already sold at public auction. Consequently, the pre-trial conference was set on June 6, 2008, but was reset on July 4, 2008. Answers were filed by respondents on May 23, 2008 9 and June 23, 2008, 10 while pre-trial briefs of both parties were filed on June 26, 2008, 11 June 27, 2008, 12 and July 4, 2008. 13 However, on July 24, 2008, respondents filed a Motion to Dismiss 14 on the ground that the Court of Tax Appeals (CTA) has no jurisdiction over the case as what is being judicially appealed are the subject assailed Orders issued by the District Collector of Customs, Port of Manila, and not by the Commissioner of Customs. As argued by respondents, Section 7 (4) of Republic Act (RA) No. 1125, as amended by RA No. 9282, and Section 2313 of the Tariff and Customs Code of the Philippines (TCCP), conferring jurisdiction to the CTA do not include the power to review the orders or decisions of the Collector of Customs. HcaDTE Upon consideration of petitioners' "Comment/Opposition (To Respondents' Motion to Dismiss)" dated August 8, 2008 15 and "Rejoinder" dated September 1, 2008, 16 and respondents' "Reply" dated August 15, 2008, 17 the Court in Division issued the assailed Resolution dated September 29, 2008 18 granting respondents' motion. The Court explained that under Section 2313 of the TCCP, the action or decision of the Collector is subject to the review powers of the Commissioner of Customs. It concluded by stating that the doctrine of primary jurisdiction does not warrant a court to arrogate unto itself the authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of special competence, such as the Commissioner of Customs. Subsequently, in the assailed Resolution dated February 11, 2009, 19 the Court in Division denied petitioners' Motion for Reconsideration of the Resolution dated September 29, 2008 for being pro forma. Hence, this recourse before the Court En Banc praying that the assailed Resolutions dated September 29, 2008 and February 11, 2009 of the Court in Division be reversed and set aside; that the respondents be ordered to immediately release the subject shipments; and that if such release and restitution are no longer possible, respondents be ordered to solidarily pay petitioners the amount of at least P50,000,000.00, exclusive of interest. In the Resolution dated March 25, 2009, 20 the Court En Banc required petitioners to submit certified true copies/duplicate original copies of the assailed Resolutions, to present the Secretary Certificate authorizing a certain Leandro Antonio P. Talaue to act for and in behalf of both petitioners to appeal the subject Resolutions; while petitioner's counsel, Atty. Alentajan, was likewise ordered, by way of compliance, to indicate his MCLE Compliance number for the second compliance period, and the date the same was issued. Petitioners filed their Compliance 21 thereto on April 13, 2009.

Thereafter, on April 24, 2009, this Court issued a Resolution 22 noting said compliance, admitting the pertinent documents as part of the records of the case, and requiring respondents to file a comment to the instant Petition for Review. Upon submission of respondents' Comment on June 8, 2009, 23 this case was deemed submitted for decision in a Resolution dated June 15, 2009. 24 Hence, this Decision. THE ISSUES The issues raised by petitioner in the instant petition are as follows: "I. WHETHER OR NOT THE FIRST DIVISION OF THIS HONORABLE COURT ERRED IN DISMISSING THE PETITION. II. WHETHER OR NOT THE PETITIONERS VIOLATED ANY OF THE PROVISIONS OF THE TARIFF AND CUSTOMS CODE OF THE PHILIPPINES. III. WHETHER OR NOT THE RESPONDENTS SHOULD RELEASE THE SUBJECT SHIPMENTS TO THE PETITIONERS. IV. WHETHER OR NOT PETITIONERS ARE ENTITLED TO ACTUAL DAMAGES IN THE AMOUNT OF PHP55,000,000.00 IF RELEASE AND RESTITUTION ARE NO LONGER POSSIBLE." 25 Petitioners' arguments Petitioners submit the following arguments: "this case falls under the exception on exhaustion of administrative remedies; petitioners have been denied due process; judicial action is not inconsistent with Section 2313 of the Tariff and Customs Code; the petition falls under the exception to the doctrine of primary jurisdiction; and, this case falls under the exception on the exhaustion of administrative remedies. IAETSC According to petitioner, the Court of Tax Appeals has jurisdiction over the subject matter of this case under one of the exceptions to the rule on exhaustion of administrative remedies, and the doctrine of primary jurisdiction, wherein an irreparable injury or damage will be suffered by a party if he should await, before taking court action, the final action of the administrative official concerned on the matter as a result of a patently illegal order, or where appeal would not prove to be speedy and adequate remedy. Moreover, petitioners have allegedly been denied due process as the subject shipments have been auctioned without any prior notice to them, or a hearing for such purpose; hence, resort to the Commissioner of Customs would not be an adequate and speedy remedy. Lastly, petitioner argues that judicial action is not inconsistent with Section 2313 of the TCCP.

Respondents' counter-arguments In respondents' Comment, they explain that the Court in Division correctly dismissed the petition for lack of jurisdiction as Section 7 of RA No. 9282 does not confer upon the Court of Tax Appeals the power to review orders or decisions of the Collector of Customs; otherwise, this would render the power of supervision and control of the Commissioner of Customs over Collector of Customs nugatory. Consequently, due to failure of petitioners to perfect an appeal, said orders of the Collector of Customs before the Commissioner of Customs in the manner and within the period fixed by law, the said orders/decisions became final and executory. Respondents submit that petitioners were not deprived of their right to due process in the proceedings as this constitutional mandate is deemed satisfied if the pleader is granted an opportunity to seek reconsideration of the action or ruling complained of. DHAcET THE COURT EN BANC'S RULING We shall first resolve the issue on the legality of the dismissal of the petition in CTA Case No. 7782 by the Court in Division. A careful and closer look at the arguments set forth by the petitioners in the instant petition for review readily reveal that the grounds relied upon, more particularly on the issue of the dismissal of the case by reason of lack of jurisdiction over the assailed Orders dated April 15, 2008 and April 30, 2008, both issued by respondent Horacio Suansing, Jr., District Collector of Customs of the Port of Manila, are mere restatements of petitioners' previous arguments raised before the Court a quo. It is Our finding that these matters have already been exhaustively discussed and passed upon by the Court in Division in its assailed Resolution dated September 29, 2008 and correspondingly adhere to the factual and legal findings of the Court in Division in resolving respondents' Motion to Dismiss, to wit: "Section 2313 of the Tariff and Customs Code states: SEC. 2313. Review by Commissioner. The person aggrieved by the decision or action of the Collector in any matter presented upon protest or by his action in any case of seizure may, within fifteen (15) days after notification in writing by the Collector of his action or decision, give written notice to the Collector and one copy furnished to the Commissioner of his desire to have the matter reviewed by the Commissioner. Thereupon the Collector shall forthwith transmit all the records of the proceedings to the Commissioner, who shall approve, modify or reverse the action or decision of the collector and take such steps and make such orders as may be necessary to give effect to his decision. (Emphasis supplied) It is clear from the foregoing that an 'action' of the Collector is subject to the review powers of the Commissioner, and that an aggrieved party may file a written notice invoking such powers within fifteen (15) days after being notified of such 'action'. As the term 'action' is couched in general terms, it must necessarily include the act of 'auctioning', which in this case, was conducted by the Collector on the subject forfeited shipments of petitioners. Thus, petitioners cannot validly claim that there was no 'adequate and speedy remedy' to justify their direct resort to this Court. cCTIaS

Neither was there violation of due process. When the Collector of Customs issued an order of forfeiture of the subject shipments on April 15, 2008, petitioners immediately or on April 24, 2008 filed a Motion for Reconsideration and/or Appeal of such order. Acting on such Motion, the Collector denied the same through an Order dated April 30, 2008. It has been held that the essence of due process in administrative proceedings is an opportunity to explain one's side OR an opportunity to seek reconsideration of the action or ruling complained of. Thus, denial of due process cannot be successfully invoked by a party who has had the opportunity to be heard on his motion for reconsideration. ATDHSC There being no violation of due process, and finding that there is in fact an adequate and speedy remedy available to petitioner, the latter's immediate resort to judicial action is not justified. Moreover, it is undoubted that fidelity to the basic concept of exhausting administrative remedies calls for the equally fundamental principle of primary jurisdiction to be respected. The question of seizure and forfeiture is for the Collector to determine in the first instance and then the Commissioner. This is a field where the doctrine of primary jurisdiction controls. Thereafter, an appeal may be taken to this Court. DTEScI Under the sense-making and expeditious doctrine of primary jurisdiction, courts cannot or will not determine a controversy involving a question which is within the jurisdiction of an administrative tribunal prior to the decision of that question by the administrative tribunal, where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience, and services of the administrative tribunal to determine technical and intricate matters of fact, and a uniformity of ruling is essential to comply with the purposes of the regulatory statute administered. In this era of clogged court dockets, the need for specialized administrative boards or commissions with the special knowledge, experience and capability to hear and determine promptly disputes on technical matters or essentially factual matters, subject to judicial review in case of grave abuse of discretion, has become well high indispensable. The doctrine of primary jurisdiction does not warrant a court to arrogate unto itself the authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of special competence." 26 Apparently, from the foregoing conclusion judiciously arrived at by the Court in Division, petitioners' failure to administratively appeal the subject Orders of the Collector of Customs to the Commissioner of Customs, in accordance with the procedures laid down in Section 2313 of the TCCP, is fatal to their cause, rendering petitioners' judicial appeal through a Petition for Review before the Court of Tax Appeals premature.

Section 7 (a) (4) of Republic Act (R.A.) No. 1125 (An Act Creating the Court of Tax Appeals), as amended by Republic Act (R.A.) No. 9282, provides the exclusive but limited appellate jurisdiction of this Court, insofar as decisions of the Commissioner of Customs are concerned, quoted hereunder as follows: SEC. 7. Jurisdiction. The CTA shall exercise: (a) xxx Exclusive appellate jurisdiction to review by appeal, as herein provided: xxx xxx

(4) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees or other money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs;" (Emphasis Ours) TIcEDC Moreover, Section 11 thereof clearly states: SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. Any party adversely affected by a decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial Courts may file an appeal with the CTA within thirty (30) days after the receipt of such decision or ruling or after the expiration of the period fixed by law for action as referred to in Section 7(a)(2) herein. xxx xxx xxx." (Emphasis Ours)

Thus, to properly invoke the jurisdiction of this Court, the "decisions" mentioned in the aforequoted legal provisions, must pertain to decisions of the Commissioner of Customs involving liability for customs duties, fees or other money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs. Clearly therefore, the decision or order of the Collector of Customs, as such in this case, is not the decision contemplated in Section 7 (a) (4) of R.A. No. 1125, as amended by R.A. No. 9282. acAESC As a court of special appellate jurisdiction, it can only try cases permitted by statute. 27 Therefore, We are in accord with the Court in Division in dismissing the Petition for Review filed in CTA Case No. 7782, as it was left with no recourse but to do so for lack of jurisdiction. In this regard, it becomes unnecessary to resolve the other issues raised in this petition. Correspondingly, We find no reversible error committed by the Court in Division that would merit a reversal of its assailed Resolutions dated September 29, 2008 and February 11, 2009. WHEREFORE, premises considered, the instant petition is hereby DENIED DUE COURSE, and accordingly DISMISSED for lack of merit. SO ORDERED.

(SGD.) ERLINDA P. UY Associate Justice Ernesto D. Acosta, P.J., Juanito C. Castaeda, Jr., Lovell R. Bautista, Caesar A. Casanova and Olga PalancaEnriquez, JJ., concur. Footnotes 1. Chaired by Presiding Justice Ernesto D. Acosta, with Associate Justice Lovell R. Bautista and Associate Justice Caesar A. Casanova as members. 2. 3. 4. 5. 6. 7. 8. Docket, pp. 21-25. Docket, pp. 27-28. Annex "E", Petition for Review, Docket, pp. 29-30. Annex "F", Petition for Review, Docket, pp. 31-35. Annex "G", Petition for Review, Docket, pp. 36-38. Annex "K", Petition for Review, Docket, pp. 51-59. CTA Case No. 7782, Docket, p. 29.

9. Answer with Counterclaim, Annex "L", Petition for Review, Docket, pp. 60-104; CTA Case No. 7782, Docket, pp. 37-83 10. Answer, Annex "N", Petition for Review, Docket, pp. 112-125; CTA Case No. 7782, Docket, pp. 87-95. 11. Petitioners' Pre-Trial Brief, Annex "M", Petition for Review, Docket, pp. 105-111; CTA Case No. 7782, Docket, pp. 96-129. 12. Respondents' Pre-Trial Brief, Annex "O", Petition for Review, Docket, pp. 121-125; CTA Case No. 7782, Docket, pp. 150-155. 13. Respondent Attorneys Gatchalian and Langkay's Pre-Trial Brief, Annex "P", Petition for Review, Docket, pp. 126-131; CTA Case No. 7782, Docket, pp. 143-149. 14. 15. 16. 17. Annex "R", Petition for Review, Docket, pp. 138-146; CTA Case No. 7782, Docket, pp. 165-173. Annex "S", Petition for Review, Docket, pp. 147-150; CTA Case No. 7782, Docket, pp. 176-179. Annex "U", Petition for Review, Docket, pp. 159-161; CTA Case No. 7782, Docket, pp. 189-192. Annex "T", Petition for Review, Docket, pp. 151-158; CTA Case No. 7782, Docket, pp. 181-188.

18. 19. 20. 21. 22. 23. 24. 25. 26.

Annex "C", Petition for Review, Docket, pp. 20-25. Annex "D", Petition for Review, Docket, pp. 26-28. Docket, pp. 171-173. Docket, pp. 174-181. Docket, pp. 183-184. Docket, pp. 191-204. Docket, p. 206. Issues, Petition for Review, p. 8. Assailed Resolution dated September 29, 2008, pp. 2-5.

27. Moog Controls Corporation Philippine Branch vs. Commissioner of Internal Revenue, C.T.A. EB No. 44 (C.T.A. Case No. 6700), May 10, 2005, with Entry of Judgment dated January 6, 2006.

FORMER EN BANC [C.T.A. EB CASE NO. 503. April 15, 2010.] (C.T.A. CASE NO. 7879) UNIOIL PETROLEUM PHILIPPINES, INC., petitioner, vs. HON. NAPOLEON MORALES, in his capacity as Commissioner of Customs, HON. FEDERICO BULANHAGUI, in his capacity as OIC-District Collector of the Port of Limay, Bataan, HON. FERNANDO TUASON, in his capacity as Chief of the Intelligence Division of the CIIS, HON. JAIRUS PAGUNTALAN, in his official capacity as Director of the CIIS, and their successors, agents, assignees, or any other person acting under their authority, respondents. DECISION PALANCA-ENRIQUEZ, J p:

The decisions of the Commissioner of Customs, which are appealable to the Court of Tax Appeals (CTA), under Section 3 (a) (4), Rule 4 of the 2005 Revised Rules of CTA, as amended, are judgments or orders that dispose of the case in a manner that leaves nothing to be done by it in respect thereto. ADECcI THE CASE This is a Petition for Review filed by Unioil Petroleum Philippines, Inc. (hereafter "petitioner"), under Section 3 (a) (4), Rule 4 of the 2005 Revised Rules of the Court of Tax Appeals, as amended, in relation to Rule 43 of the 1997 Rules of Civil Procedure, as amended, which seeks to reverse and set aside the Resolutions dated March 20, 2009 and June 22, 2009 rendered by the Former First Division of this Court in C.T.A. Case No. 7879, entitled "Unioil Petroleum Philippines, Inc. vs. Hon. Napoleon Morales, et al.," the respective dispositive portions of which read, as follows: "WHEREFORE, premises considered, the application for the issuance of TRO and/or Writ of Preliminary Injunction is hereby DENIED. Furthermore, considering that this Court has no jurisdiction over the instant Petition for Review, the same is hereby DISMISSED. SO ORDERED." "WHEREFORE, there having no new matters or issues advanced by the petitioner in the present motion which may compel this Court to reverse, modify, or amend the March 20, 2009 Resolution of this Court, petitioner's "Motion for Reconsideration" is hereby DENIED for lack of merit. cEHSIC SO ORDERED." THE PARTIES Petitioner Unioil Petroleum Philippines, Inc. is a corporation duly organized and existing under Philippine Laws, with address at 2445 Pedro Gil St., Sta. Ana, Manila. On the other hand, respondent Napoleon Morales is the duly appointed Commissioner of Customs and holds office at the Bureau of Customs, Port Area, Manila; respondent Federico Bulanhagui is the OICDistrict Collector of the Port of Limay, Bataan and holds office at Port of Limay, Bataan; respondent Fernando Tuason is the Chief, Intelligence Division of the Customs Intelligence and Investigation Service ("CIIS") and holds office at the Bureau of Customs, Manila; respondent Jairus Paguntalan is the Director of the CIIS and holds office at the Bureau of Customs, Manila; while respondents John and Jane Does are unidentified individuals, representatives and other persons, acting under the authority of and implementing the orders of respondents Commissioner Morales, Bulanhagui and Paguntalan. DCaEAS THE FACTS The facts of the case, as culled from the records, are as follows: Petitioner is an importer of Aromatic Hydrocarbons with permit from the BIR, as evidenced by its Permit No. LTAD II (P)-001-10-07-13639. In addition, at the time of the importation of the subject product,

petitioner was likewise an accredited importer by the Bureau of Customs (BOC), as evidenced by CAS Accreditation No. CASRIM 0221202-08. On April 17, 2008, petitioner entered into a Purchase Agreement with Yokohama Tire Philippines, Inc. for the supply of Aromatic Hydrocarbon, a raw material. On June 19, 2008, pursuant to the Purchase Agreement, petitioner imported, through MT Jin Hong, 8, 2,098,450 MTS of Aromatic Hydrocarbon covered by Bill of Lading with B/L No. JH8-0619. Upon arrival, petitioner immediately processed all the necessary documents with the BOC in relation to said importation, including the filing of appropriate Import Entry and Internal Revenue Declaration (IEIRD). DSTCIa Prior to its withdrawal, petitioner fully paid the corresponding import taxes and duties in the total amount of P10,814,417.00 over the said products, as evidenced by BC Form 38-A with Nos. 152787704, 153199487 and 158353431. Based on intelligence information that the importation of petitioner Unioil declared as Aromatic Hydrocarbons is actually petroleum oil and oil obtained from bituminous minerals subject to excise tax, the CIIS directed its field agents to obtain samples of said importation. The samples taken were brought to the University of the Philippines (UP)-National Sciences Research Institute (NSRI), Research and Analytical Services Laboratory for analysis. On July 25, 2008, Dr. Evangeline C. Santiago of the UP-NSRI submitted a report on the results of the laboratory analysis conducted on said samples showing that the same contains point zero one percent (0.01%) by weight of total Polycyclic Aromatic Hydrocarbons (17 PAHs). Dr. Santiago explained that the samples are really oil products and not Aromatic Hydrocarbons, as petitioner represented them to be, since their Aromatic contents are negligible. DaHISE The CIIS informed petitioner of the findings of UP-NSRI. Petitioner claimed that the findings of UP-NSRI is not conclusive because it accounted only for Polycyclic Aromatic Hydrocarbon and that the Monocyclic Aromatic Hydrocarbons (benzene and its derivatives) were not accounted for in the laboratory test results, which were allegedly the main component of the samples submitted. In support thereof, petitioner cited the Certificate of Quality issued from its supplier, which stated that based on ASTM D 2007, the Aromatics content of the shipment from which the samples were taken, was allegedly seventy point sixty-seven percent (70.67%). To further confirm the aforesaid findings of the UP-NSRI, the CIIS referred the matter of analysis of subject samples to a U.S.-based laboratory to properly determine and classify the composition of said samples. On December 11, 2008, the CIIS received the Laboratory Report dated December 5, 2008 from the US Immigration and Customs Enforcement of the US Department of Homeland Security issued by the Laboratories and Scientific Services of the US Customs and Border Protection, Department of Homeland Security. Pertinent portion of the Laboratory Report reads, as follows: cIHDaE

"This sample consists of a viscous greenish-brown liquid contained within four metal cans. Laboratory analysis finds that this sample has an API gravity of 9.9, an ash content of approximately 1.3 percent, an aromatic hydrocarbon content of approximately eleven percent, and a non aromatic hydrocarbon content of approximately 89 percent. This sample is a petroleum oil classifiable under HTS HEADING 2710. Methods: SFTEC-GC/MS.2 and ASTM E. 1252." As a result, the CIIS submitted its Officers-On-Case-Report dated January 28, 2009 to the Chief of the Intelligence Division of the BOC, with the following conclusion and recommendation: EHACcT "CONCLUSION: Considering that importations of UNIOIL/OILINK declared as AROMATIC HYDROCARBON are actually PETROLEUM OILS subject to EXCISE TAXES, in violation of Section 2503 (misdeclaration) of the Tariff and Customs Code of the Philippines (TCCP), as amended, in relation to Republic Act No. 8424 (National Internal Revenue Code) for non-payment of EXCISE TAX, is therefore established, and subject to FORFEITURE under Section 2530, Sub-para. (f), (i), (1) -3, 4, and 5 of the TCCP, as amended. RECOMMENDATION: In the light of the foregoing, this office most respectfully recommend for the following: 1. Request for immediate issuance of WARRANT OF SEIZURE AND DETENTION (WSD) against shipments of AROMATIC HYDROCARBON of UNIOIL/OILINK presently stored at Storage Tank Nos. 6 and 21 located at OILINK depot in Lucanin, Mariveles, Bataan, for blatant violation of Section 2503 (Misdeclaration) of the TCCP, as amended, in relation to RA No. 8424 (NIRC), being subject to FORFEITURE under Section 2530, Sub-para. (f), (i), (1) -3, 4, and 5 of the TCCP, as amended. acIHDA 2. That BIR Ruling dated March 10, 2005, issued by the Deputy Commissioner for Legal & Inspection Group, be considered NULL AND VOID (as provided for in said MEMO) considering that the result of laboratory analysis is different from what was requested by UNIOIL for EXCISE TAX EXEMPTION. 3. That UNIOIL PETROLEUM PHILS., INC./OILINK International Corporation be obliged to pay for unpaid EXCISE TAXES due on their previous importations of AROMATIC HYDROCARBON commencing on the date of afore-cited ruling; and 4. That in order to determine the amount of excise tax that should have been collected from previous importations by UNIOIL/OILINK of "Aromatic Hydrocarbon," but which are found to be PETROLEUM OIL, copies of import entries covering said importations must be retrieved and secured by all legal means necessary." On January 30, 2009, Director Jairus D. Paguntalan of the CIIS issued his 1st Indorsement forwarding to the Commissioner of Customs the aforesaid Investigation Report dated January 28, 2009 of the OIC-CIIS

with the recommendation that a warrant of seizure and detention be issued against the shipments of Aromatic Hydrocarbons, stored at Storage Tank Nos. 6 and 21 in Lucanin Point, Mariveles, Bataan for Violation of Sections 2503 and 2530 (f), (i), (1) (3, 4, & 5) of the TCCP, as amended, in relation to RA 8424. CIaASH Acting on the said 1st Indorsement, the Commissioner of Customs issued his assailed 2nd Indorsement dated February 4, 2009. On February 5, 2009, OIC-District Director Federico C. Bulanhagui issued a Warrant of Seizure and Detention (WSD) against said shipment of Aromatic Hydrocarbons stored at Storage Tank Nos. 6 and 21 of UNIOIL/OILINK, located at Lucanin Point, Mariveles, Bataan. On the same day, the CIIS seized the subject shipment, which were stored at Storage Tank Nos. 6 and 21 of UNIOIL/OILINK in Lucanin Point, Mariveles, Bataan. On March 9, 2009, petitioner filed a Petition for Review with prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction with this Court, docketed as C.T.A Case No. 7879. On March 16, 2009, respondent Bulanhagui issued a notice of hearing informing the parties that the initial hearing thereon will be held on March 19, 2009. caTIDE On March 20, 2009, the Former First Division of this Court denied the Application for Issuance of TRO and/or Writ of Preliminary Injunction and dismissed the Petition for Review for lack of jurisdiction. On April 7, 2009, petitioner filed a Motion for Reconsideration, which the Former First Division denied in a Resolution dated June 24, 2009. Hence, the present Petition for Review. On August 3, 2009, without necessarily giving due course to the Petition for Review, we ordered respondents to file their comment, not a motion to dismiss, within ten (10) days from notice. On August 18, 2009, respondents filed a "Motion for Extension of Time to File Comment", which was granted by the Former Court En Banc. On September 15, 2009, respondents filed their Comment. On September 22, 2009, the Former Court En Banc gave due course to the Petition for Review and ordered both parties to file their simultaneous memoranda, within thirty (30) days from notice; afterwhich the petition shall be deemed submitted for decision. HASDcC On October 27, 2009, respondents filed their Memorandum, while petitioner filed its Memorandum on November 10, 2009. Thus, the instant petition is now deemed submitted for decision. The petition raises the following issues:

ISSUES I WHETHER OR NOT THE CTA FORMER FIRST DIVISION COMMITTED GRIEVOUS ERROR WHEN IT CONSIDERED THE DECISION OF THE COMMISSIONER OF CUSTOMS AS A MERE REFERRAL LETTER. II WHETHER OR NOT THE CTA FORMER FIRST DIVISION COMMITTED GRIEVOUS ERROR WHEN IT FAILED TO RECOGNIZE THE EXCEPTIONS TO THE RULE ON EXHAUSTION OF ADMINISTRATIVE REMEDIES. CITSAc III WHETHER OR NOT THE CTA FORMER FIRST DIVISION COMMITTED GRIEVOUS ERROR WHEN IT DISMISSED THE PETITION FOR LACK OF JURISDICTION. Principal Issue The foregoing issues boil down to the principal issue of whether the Petition for Review filed in C.T.A. Case No. 7879 was correctly dismissed by the Former First Division for lack of jurisdiction. Petitioner UNIOIL's Arguments Petitioner Unioil argues that the Constitution guarantees the right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures; the essential requisite of probable cause must still be satisfied before a warrantless search and seizure can be lawfully conducted; that only the collector can determine probable cause and issue the corresponding WSD; the subject articles were detained prior to the collector's determination of probable cause and issuance of the corresponding WSD; the determination of probable cause, if any, was based on hearsay evidence; that the 2nd Indorsement issued by the Commissioner of Customs is a final order, and disposed of the whole subject matter of the case; that the 2nd Indorsement cannot be a mere referral because said Indorsement delved into the merits of the case; that the 2nd Indorsement left nothing to be done but to enforce by execution what has been determined; that petitioner actually exhausted all administrative remedies as the Commissioner already made a determination of the case and even if petitioner failed to do so, the circumstances of this case constitute several exceptions to the rule of exhaustion of administrative remedies; that a number of exceptions to the rule on exhaustion of administrative remedies are availing in this case; that this case involves violation of petitioner's constitutional rights, not mere property rights and for this reason, this Honorable Court must wield its power of judicial review in order that it may curtail such abuses; and that a decision in this case ultimately resolves the procedure in seizure cases. aIDHET Respondents' Counter-arguments

Respondent counters that the Former First Division correctly dismissed the petition for review on the ground that it has no jurisdiction over the subject matter thereof; that the assailed 2nd Indorsement is not a decision but a mere referral letter issued by the respondent Commissioner of Customs in the exercise of his administrative duty as head of the BOC; and that the Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings, and the regular courts cannot interfere with his exercise thereof or stifle and put it to naught. Respondents further contend that notwithstanding the absence of a WSD, the Collector of Customs may already order the seizure of the subject imported products, pursuant to Section 2301 of the Tariff and Customs Code of the Philippines. Our Ruling The petition is without merit. It is an Elementary Rule in Procedure that the Decision or Order which is Appealable to this Court is that which Resolved the Case with Finality, and in Effect Terminates or Finally Disposes of a Case Section 3 (a) (4), Rule 4 of the 2005 Revised Rules of the CTA, as amended, provides: aTADCE "SEC. 3. Cases within the jurisdiction of the Court in Division. The Court in Division shall exercise: (a) xxx Exclusive original over or appellate jurisdiction to review by appeal the following: xxx xxx

(4) Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees, or other money charges, seizure, detention or release of property affected, fines, forfeitures or other penalties in relation thereto, or other matters arising under the Customs Law or other laws administered by the Bureau of Customs; xxx xxx xxx."

Pursuant to the above provision, the CTA Court in Division has exclusive appellate jurisdiction to review by appeal the decisions of the Commissioner of Customs. Settled is the rule that the decision or order which is appealable to this Court, is that which has resolved the case with finality, and in effect terminates or finally disposes of a case, as it leaves nothing to be done by the Commissioner of Customs, as the case has been decided on the merits. Indeed, a decision connotes the adjudication or settlement of a controversy. ITEcAD The amended 2nd Indorsement reads as follows: 2nd Indorsement February 04, 2009

Respectfully forwarded to the OIC-District Collector, Port of Limay (Attn: Port Collector, Mariveles), FOR APPROPRIATE ACTION, the within preceding Indorsement dated 30 January 2009, of Director Jairus D. Paguntalan, CIIS and OIC, IEG, relative to the herein Investigation Report of the OIC-CIIS, Port of Manila dated 28 January 2009 re: Importation of aromatic hydrocarbon by UNIOIL PETROLEUM PHILS., INC./OILINK INTERNATIONAL CORPORATION, inviting attention to the findings of the UP Natural Sciences Research Institute, Research and Analytical Services, Laboratory and the Laboratories & Scientific Services, US Customs and Border Protection, Dept. of Homeland Security that the samples taken from the Storage Tank No. 6 of UNIOIL/OILINK located at Lucanin Point, Mariveles, Bataan is not an Aromatic Hydrocarbon but Petroleum Oil, thus, subject to excise tax. EaCSTc Your Attention is likewise invited to the recommendation that a Warrant of Seizure and Detention be issued against the shipments of aromatic hydrocarbons presently stored at Storage Tank Nos. 6 and 21 of UNIOIL/OILINK in Lucanin Point, Mariveles, Bataan for violation of Sections 2503 and 2530 (f), (i), (1), (3, 4, & 5) of the TCCP, as amended, in relation to RA No. 8424." A careful scrutiny and examination of the above 2nd Indorsement clearly shows that the same is not a decision, but a mere referral letter issued by the Commissioner of Customs, referring to the OIC-District Collector, Port of Limay, the attached 1st Indorsement dated January 30, 2009 of respondent Jarius * D. Paguntalan and the Investigation Report dated January 28, 2009 of the CIIS for appropriate action. As aptly ruled by the Former First Division: "As indicated in the body of the 2nd Indorsement, the 1st Indorsement is about the investigation report of the OIC-CIIS, Port of Manila dated January 28, 2009, with regard to the importation of aromatic hydrocarbon by Unioil Petroleum Phils., Inc./Oilink International Corporation. Said importation was found out to be petroleum oil and not as aromatic hydrocarbon as declared by the petitioner, thus, subject to excise tax. aATHIE The tenor of the 2nd Indorsement does not also indicate that respondent-Commissioner ordered the OIC-District Collector, Port of Limay, to issue a Warrant of Seizure and Detention (WSD) against the subject shipment. The subsequent issuance of a WSD by the OIC-District Collector of the Port of Limay was based on the investigation report and evidence presented to him. To reiterate, respondent-Commissioner merely referred the investigation report to the OIC-Collector, Port of Limay, for appropriate action. Nowhere in the assailed 2nd Indorsement can it be shown that the same constitutes a final decision of the respondent-Commissioner." The Petition for Review Filed in C.T.A. Case No. 7879 was Premature It is clear, therefore, that the Petition for Review filed in C.T.A. Case No. 7879 was premature, there being no decision yet rendered by the Commissioner of Customs, which finally and actually disposed and adjudicated the seizure of petitioner's Aromatic Hydrocarbon products. Thus, the Former First Division correctly ruled that it has no jurisdiction to entertain the Petition for Review. AcHaTE

It is only after the Commissioner of Customs has rendered a decision adverse to the petitioner that the latter may appeal said decision to the CTA under Section 3 (a) (4), Rule 4 of the 2005 Revised Rules of the CTA, as amended. Petitioner's contention that its right to due process of law was violated because the detention of the subject shipment happened a full day prior to the determination of probable cause by the Collector and the issuance of the WSD is likewise without merit. Section 2301 of the TCCP, as amended, provides: "SEC. 2301. Warrant for Detention of Property Cash Bond. Upon making any seizure, the Collector shall issue a warrant for the detention of the property; and if the owner or importer desires to secure the release of the property for legitimate use, the Collector shall, with the approval of the Commissioner of Customs, surrender it upon the filing of a cash bond, in an amount to be fixed by him, conditioned upon the payment of the appraised value of the article and/or any fine, expenses and costs which may be adjudged in the case: Provided, That such importation shall not be released under any bond when there is a prima facie evidence of fraud in the importation of the article: Provided, further, That articles the importation of which is prohibited by law shall not be released under any circumstance whomsoever; Provided, finally, That nothing in this section shall be construed as relieving the owner or importer from any criminal liability which may arise from any violation of law committed in connection with the importation of the article." DEcTIS Pursuant to the above-quoted provision, notwithstanding the absence of a WSD, the Collector of Customs may already order the seizure of the subject imported products, and the WSD may be issued after said seizure was implemented. As ruled by the Supreme Court in Ponce Enrile vs. Vinuya, 37 SCRA 381: "Papa v. Magno likewise deserves to be cited. The opinion of Justice Zaldivar for the Court emphatically asserted the doctrine anew in the following language: It is the settled rule, therefore, that the Bureau of Customs acquires exclusive jurisdiction over imported goods, for the purposes of enforcement of customs law, from the moment the goods are actually in its possession or control, even if no warrant of seizure or detention had previously been issued by the Collector of Customs in connection with the seizure and forfeiture proceedings. In the present case, the Bureau of Customs actually seized the goods in question on November 4, 1966, and so from that date, the Bureau of Customs acquired jurisdiction over the goods for the purposes of the enforcement of the tariff and customs law, to the exclusion of the regular courts." DTIaCS Finding no reversible error, we affirm the assailed Resolutions dated March 20, 2009 and June 22, 2009 issued by the Former First Division. WHEREFORE, premises considered, the present Petition for Review is hereby DENIED DUE COURSE, and, accordingly DISMISSED for lack of merit.

SO ORDERED. (SGD.) OLGA PALANCA-ENRIQUEZ Associate Justice Ernesto D. Acosta, P.J., Juanito C. Castaeda, Jr., Lovell R. Bautista, Erlinda P. Uy and Caesar A. Casanova, JJ., concur.

G.R. No. 166901

October 27, 2006

ASIAN TERMINALS, INC., petitioner, vs. HON. HELEN BAUTISTA-RICAFORT, Presiding Judge of RTC, Branch 260, Paraaque City; SAMUEL ROSETE, in his personal capacity and as attorney-in-fact and in representation of NOEL TABUELOG, proprietor of BEST PART ENTERPRISES; ERNESTO DE JESUS, President of EASTERN METROPOLITAN BUS CORP.; NORMA PONDEVIDA, proprietress of NSP TRANSPORTATION SERVICES; RENATO CLAROS, President of PRINCE BUS AND TRUCK PARTS, INC.; ERNESTO M. CHUA, President of EMC TRANSPORTATION, INC.; CECILIA T. SAULOG, proprietress of MANSOUR TRANSPORT SERVICES; JENELITA S. NAPARATE, proprietress of SANEI SOUGYO TRADING; RODOLFO J. MAGO, proprietor of DNS SHUTTLE SERVICES; and AMALIA C. EDAMURA, Proprietress of DAMLAR TRADING, respondents.

DECISION

CALLEJO, SR., J.: Before us is a Petition for Review on Certiorari for the reversal of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 61562, affirming the Orders2 of the Regional Trial Court (RTC) of Paraaque City, Branch 260, in Civil Case No. 98-0435 for replevin and damages. Section 1, Republic Act (RA) No. 8506, which took effect on February 22, 1998, provides that "it shall be unlawful for any person to import, cause the importation of, register, cause the registration of, use or operate any vehicle with its steering wheel right hand side thereof in any highway, street or road, whether private or public, or at the national or local x x x."

Noel Tabuelog, Ernesto de Jesus, Norma Pondevida, Renato Claros, Ernesto M. Chua, Cecilia T. Saulog, Jenelita S. Naprate, Rodolfo F. Mago, and Amalia C. Edamura are duly-licensed importers of vehicles. Sometime in April and May 1998, they imported 72 secondhand right-hand drive buses from Japan. When the shipment arrived at the South Harbor, Port of Manila, the District Collector of Customs impounded the vehicles and ordered them stored at the warehouse of the Asian Terminals, Inc. (ATI), a customs-bonded warehouse under the custody of the Aviation and Cargo Regional Division. Conformably with Section 2607 of the Tariff and Customs Code, the District Collector of Customs issued Warrants of Distraint3 against the shipment and set the sale at public auction on September 10, 1998.4 In the meantime, on October 28, 1998, the Secretary of Justice rendered Opinion No. 127,5 Series of 1998, stating that shipments of right hand wheel vehicles loaded and exported at the port of origin before February 22, 1998 were not covered by RA No. 8506 unless the same were loaded and imported after said date. On November 11, 1998, the importers, through their Attorney-in-Fact Samuel N. Rosete, filed a complaint with the RTC of Paraaque City, against the Secretary of Finance, Customs Commissioner, and the Chief Executive of the Societe Generale de Surillee, for replevin with prayer for the issuance of a writ of preliminary and mandatory injunction and damages. Plaintiffs averred, inter alia, that in accordance with the opinion of the Assistant Director of the Customs Legal Service and the Office of the Legal Affairs of the Department of Finance, the importation of right-hand drive vehicles are not prohibited under RA No. 8506 provided that conversion kits are included in the imported vehicles. As such, there was no factual and legal basis for the seizure of the shipment and the storage thereof at the ATI. The complaint contained the following prayer: WHEREFORE, premises considered, it is most respectfully prayed before this Honorable Court that an Order be issued in the following tenor: A. PRIOR TO HEARING: 1. A Writ of Replevin be issued upon the posting of a bond of PhP12,000,000.00 (double the value of the vehicles) executed in favor of defendants to answer for damages, and approved by this Court, directing the Sheriff or his deputies to forthwith take custody of the said vehicles which are in the possession and custody of the defendants or their agents at the Bureau of Customs Holding Area, located at South Harbor, Port Area, Manila City, and retain it in its custody; B. AFTER HEARING: 1. To pay the sum of PhP6,000,000.00 if the Writ of Replevin cannot be implemented successfully plus interest until fully paid; 2. To pay compensatory damages of not less than PhP840,000.00 for unrealized profits, moral damages of not less [than] PhP1,000,000.00, exemplary damages of not less than PhP250,000.00, litigation and necessary expenses of not less than PhP500,000.00, attorneys fees on a contingent basis, not less than P1,000,000.00 actual damages if and when plaintiffs are legally obliged to pay storage fees; 3. Such other reliefs just and equitable under the premises.6

The RTC granted the application for a writ of replevin on a bond of P12,000,000.00.7 However, George Jeroes, the Chief of Customs Police and four (4) customs policemen prevented the Sheriff and the policemen assisting him from taking custody of the vehicles.8 He claimed that the District Collector of Customs had jurisdiction over the vehicles. On motion of the plaintiffs, the court issued an Order9 on November 23, 1998, directing the PNP Director to assist the Sheriff in implementing the writ it issued and to arrest anyone who would obstruct the implementation of its order. The Sheriff served a copy of the Order on ATI and succeeded in taking custody of the vehicles and signed a receipt therefor.10 The District Collector of Customs agreed to transfer the custody of the vehicles to the RTC, on the condition that the required taxes, dues, and other charges be paid. The Customs Commissioner approved the decision of the District Collector.11 Plaintiffs paid the requisite taxes, dues, and other charges amounting to P7,528,635.00. They were able to take possession of the vehicles over the objections of ATI.12 On November 27, 1998, the defendants, through the Office of the Solicitor General, filed an Omnibus Motion13, seeking the reconsideration of the RTC Order granting plaintiffs plea for a writ of replevin. It likewise prayed that the writ of replevin issued by the court be quashed on the ground that the RTC has no jurisdiction over the vehicles subject of seizure and detention before the Bureau of Customs. The OSG declared that the Bureau of Customs which had custody of the vehicles through ATI "had exclusive jurisdiction over said vehicles and on the issues of the seizure and detention thereof." The ATI filed a motion for the court to allow the vehicles to remain in its warehouse.14 On December 1, 1998, the ATI filed a Third-Party Claim15 over the shipment, alleging that it had a lien over the vehicles for accumulated and unpaid storage and arrastre charges, and wharfage dues amounting toP13,036,480.94. It prayed that the vehicles be returned and remain with it until payment of said dues. On December 9, 1998, ATI filed a Motion16 seeking to require plaintiffs (third-party defendants) to post a bond to insure payment of its claims against the plaintiffs, or to order the Sheriff to return possession of the vehicles to it. Plaintiffs opposed the Third-Party Claim of ATI claiming that it failed to allege in its Affidavit of ThirdParty Claim any factual and legal basis for its alleged lien and to present documentary evidence to prove the same. ATI has no cause of action against them for wharfage/arrastre services because there was no contract to cover said charges.17 Before the court could resolve the motions, plaintiffs filed a "Motion/Notice to Dismiss/Withdraw Complaint"18against the officials of the Bureau of Customs and Department of Finance, on the ground that said defendants had agreed to the implementation of the writ of replevin issued by the court on condition that plaintiffs pay the taxes, dues, and other charges on the importation amounting to P7,528,635.00 to the government and that plaintiffs had paid the said amount. The OSG opposed the motion, alleging that: The instant Complaint states that the subject importation is legal. This is a matter which cannot be admitted by defendants simply because the law and the Opinion of the Secretary of Justice are crystal clear. Likewise, all the erroneous statements of law and legal conclusions stated therein cannot be hypothetically admitted. 3. Hence, it is imperative that the Omnibus Motion be resolved first prior to any other incident for the same delves on the very merits of the instant case.

4. The release of the imported right-hand drive buses by the Bureau of Customs cannot make the said importation legal; otherwise, said act will constitute a violation of R.A. No. 8506 which declares illegal the act of importation of this type of vehicle. 5. The Bureau of Customs was constrained to release the subject vehicles on November 27, 1998 because of this Courts Order dated November 23, 1998, the last paragraph of which states: "Chief of PNP General Roberto Lastimoso is ordered to assist the Sheriff in the implementation of its order dated November 11, 1998 and to effect the arrest of persons who would obstruct the implementation of this courts order." The overwhelming number of PNP personnel who accompanied the sheriff (there were at least 20 police cars which swarmed over the area), pitied against only three (3) hapless Customs policemen, plus the threat to arrest anyone who would obstruct the implementation of the Order dated November 11, 1998 granting the application for a Writ of Replevin, left the Bureau of Customs with no choice but to allow the release of the subject vehicles.19 On January 13, 1999, ATI filed a Motion for Intervention and for Admission of its Complaint-inIntervention, alleging that it had a lien on the vehicles to the extent of P13,820,150.93, representing accumulated storage and arrastre charges and wharfage dues. ATI prayed that its Complaint-inIntervention be admitted, and that after due proceedings judgment be rendered in its favor, thus: WHEREFORE, it is respectfully prayed of this Honorable Court that judgment be rendered in this Complaint-in-Intervention ordering plaintiffs to pay intervenor: a) the sum of PESOS THIRTEEN MILLION EIGHT HUNDRED TWENTY THOUSAND ONE HUNDRED FIFTY AND 93/100 (P13,820,150.93), plus legal interest from the date of the filing of this Complaint-in-Intervention. b) the sum of PESOS ONE HUNDRED THOUSAND (P100,000.00) as and for attorneys fees; and c) costs of suit.20 Plaintiffs opposed the motion of ATI on the following grounds: (1) ATI failed to allege and present any contract covering the deposit/storage of the vehicles in its warehouse; (2) ATI has no legal interest over the matter in litigation; and (3) the adjudication of the rights of the parties may be delayed or prejudiced while those of ATI may be protected in a separate proceeding.21 The OSG opposed the motion of the plaintiffs and the notice to dismiss/withdraw the complaint, praying that the court resolve its pending motions.22 On April 27, 1999, the court issued an Order dismissing the complaint on the following grounds: 1. Plaintiffs themselves filed a Motion to Dismiss against Secretary of Finance and Commissioner of Customs. 2. This Court has no jurisdiction over the case. "The Court of Tax Appeals exercises exclusive appellate jurisdiction to review the ruling of the Commissioner in seizure and

confiscation cases and that power is to the exclusion of the Court of First Instance which may not interfere with the Commissioners decisions x x x" In view of the foregoing, let this case be as it is hereby ordered Dismissed. SO ORDERED.23 The OSG filed a motion for reconsideration of the April 27, 1999 Order, and prayed that the court resolve the issue as to who is entitled to the possession of the vehicles as required by Sections 9 and 10, Rule 60 of the Rules of Court. For its part, ATI filed a motion for clarification of the order, alleging that the court failed to resolve its motion. It also pleaded for the court to admit its Complaintin-Intervention and its motion seeking to require plaintiffs to post a bond to insure payment of its claims for wharfage/arrastre charges.24 On September 23, 1999, the RTC issued its Order dismissing the Complaint-in-Intervention, thus: Before this Court are the following Motions: 1. Motion for Clarification, and 2. Motion for Reconsideration The Complaint-in-Intervention of Intervenor - ATI is likewise dismissed, it being only an accessory to the principal case. Plaintiff Samuel Rosete is hereby ordered to return the possession of the subject buses to Pedro Mendoza, in his capacity as Customs Commissioner of the Bureau of Customs. SO ORDERED.25 ATI filed a motion for reconsideration, which the court denied on July 31, 2000. While it recognized the arguments of ATI, the court held that its rights could be fully protected in a separate proceeding. It declared that the subject buses were under custodia legis by virtue of the writ of replevin it had issued. However, due to the dismissal of the plaintiffs complaint, the subject buses have to be returned to the person who was in custody prior to the implementation of the writ. The motion for reconsideration filed by ATI and the opposition filed by plaintiffs were likewise denied.26 ATI filed a Petition for Certiorari under Rule 65 before the CA, assailing the RTC Orders dated April 27, 1999, September 23, 1999, and July 31, 2000. It raised the following questions: WHETHER OR NOT THE LOWER COURT COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT OUTRIGHTLY DISMISSED THE SUBJECT COMPLAINT FILED BY PRIVATE RESPONDENTS. WHETHER OR NOT THE LOWER COURT COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT DENIED THE MOTION FOR RECONSIDERATION FILED BY THE PETITIONER. WHETHER OR NOT THE PUBLIC RESPONDENTS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT OUTRIGHTLY DISMISSED THE COMPLAINT-IN-INTERVENTION FILED BY PETITIONER.27

ATI averred that it filed its Complaint-in-Intervention before the RTC dismissing the complaint of private respondents. It pointed out that the dismissal of the main case does not necessarily result in the dismissal of its ancillary action because it has a legal interest in the matter in litigation, that is, it is so situated as to be adversely affected by the distribution or other disposition of the property in question. It thus behooved the court to have ordered respondents to post a bond following its thirdparty claim over the property for the collection of the wharfage and arrastre fees/charges. On November 30, 2004, the CA rendered judgment dismissing the petition for lack of merit.28 The appellate court ruled that the RTC had no jurisdiction over the complaint filed by respondents. Under the Customs and Tarriff Code, the Collector of Customs sitting in seizure and forfeiture proceedings had the exclusive jurisdiction to hear and determine all questions relating on the seizure and forfeiture of dutiable goods. The RTC had no review powers over such proceedings; it is the Court of Tax Appeals under RA No. 1125. Since the RTC had no jurisdiction over the main case, it was also bereft of authority to hear the third-party claim or the complaint-in-intervention filed by ATI. Citing Saw v. Court of Appeals,29 the appellate court ruled that intervention was not an independent proceeding but merely an ancillary and supplemental one, which, in the nature of things, is subordinate to the main proceeding unless otherwise provided for by statute or by the Rules of Court. The general rule is that an intervention is limited to the field of litigation open to the original parties. The RTC had dismissed the main action; thus, there was no more principal proceeding in which petitioner ATI may intervene. ATI filed a motion for reconsideration, which the CA denied through its January 28, 2005 Resolution.30 In the present petition, ATI (now petitioner) raises the following issues: 1. THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN DISMISSING THE THIRD-PARTY CLAIM WHICH WAS CONVERTED INTO A COMPLAINT-IN-INTERVENTION BASED ON THE GROUND THAT IT IS ANCILLARY TO THE DISMISSED MAIN ACTION. 2. THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN DISMISSING THE THIRD-PARTY CLAIM WHICH WAS CONVERTED INTO A COMPLAINT-IN-INTERVENTION BASED ON THE GROUND THAT THE COURT A QUO HAS NO JURISDICTION OVER THE PRINCIPAL ACTION. 3. THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN DISMISSING THE COMPLAINT IN INTERVENTION ON THE BASIS OF THE RULING IN BARANGAY MATICTIC VS. ELBINIAS (148 SCRA 83).31 Citing Metropolitan Bank and Trust Company v. The Presiding Judge, RTC, Manila Branch 39,32 petitioner maintains that the dismissal of the original complaint filed by respondents cannot, in any way, result in the denial of its complaint-in-intervention. It posits that its consent as intervenor is necessary for the dismissal of the main action, and that the original parties cannot "isolate" it and agree, among themselves, to dismiss the complaint. Petitioner asserts that, even if the original complaint was properly dismissed, its complaint-in-intervention survives the original complaint and may proceed as long as the existence of an actual controversy had been established by the pleadings. It insists that the intervention has to be heard regardless of the disposition of the principal action. Petitioner submits that even on the assumption that the lower court has no jurisdiction over the principal action, the third-party complaint may still be maintained.

Petitioner further contends that the appellate court erred in relying on Barangay Matictic v. Elbinias33 because in that case, the third-party-complaint was filed after the decision in the main case had already become final, whereas, in the present case, the third-party claim and third-party complaint before the RTC dismissed respondents action. Petitioner maintains that the Metropolitan case is thus applicable, and points out that the Court therein ruled that the complaint-in-intervention should be preserved regardless of the outcome of the original complaint. For their part, respondents assert that the CA decision is in accord with the Rules of Court. We are thus tasked to resolve the issue of whether the CA erred in dismissing the petition for certiorari of the petitioner. The petition is denied for lack of merit. We rule that the trial court acted in accordance with the Tariff and Customs Code (TCC) and the rulings of this Court when it issued the assailed Orders. Section 602 of the TCC provides that the Bureau of Customs shall exercise exclusive jurisdiction over seized and forfeited cars. It is tasked to enforce tariff, and supervise and control customs law and all other laws, rules and regulations relating to the tariff and customs administration; and to supervise and control all import and export cargoes, loaded or stored in piers, terminal facilities, including container yards and freight stations, for the protection of government revenues. Under Section 2301 of the TCC, the Collector of Customs is empowered to make a seizure of cargoes and issue a receipt for the detention thereof: SEC. 2301. Warrant for Detention of Property-Cash Bond. Upon making any seizure, the Collector shall issue a warrant for the detention of the property; and if the owner or importer desires to secure the release of the property for legitimate use, the Collector shall, with the approval of the Commissioner of Customs, surrender it upon the filing of a cash bond, in an amount to be fixed by him, conditioned upon the payment of the appraised value of the article and/or any fine, expenses and costs which may be adjudged in the case: Provided, That such importation shall not be released under any bond when there is a prima facie evidence of fraud in the importation of the article: Provided further, That articles the importation of which is prohibited by law shall not be released under any circumstance whomsoever, Provided, finally, That nothing in this section shall be construed as relieving the owner or importer from any criminal liability which may arise from any violation of law committed in connection with the importation of the article. (emphasis supplied) Section 2530 of the TCC enumerates the properties subject of seizure and forfeiture: Section 2530. Property Subject of Forfeiture Under Tariff and Customs Laws. Any vehicle, vessel or aircraft, cargo, article and objects shall, under the following conditions be subject to forfeiture: xxxx (f) Any article the importation or exportation of which is effected or attempted contrary to law, or any article of prohibited importation or exportation, and all other articles which, in the opinion of the Collector, have been used, are or were entered to be used as instruments in the importation or exportation of the former.

As the Court ruled in Jao v. Court of Appeals,34 Regional Trial Courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with these proceedings. It is the Collector of Customs, sitting in seizure and forfeiture proceedings, who has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. The Regional Trial Courts are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus. The Court further explained: It is likewise well-settled that the provisions of the Tariff and Customs Code and that of Republic Act No. 1125, as amended, otherwise known as "An Act Creating the Court of Tax Appeals," specify the proper fora and procedure for the ventilation of any legal objections or issues raised concerning these proceedings. Thus, actions of the Collector of Customs are appealable to the Commissioner of Customs, whose decision, in turn, is subject to the exclusive appellate jurisdiction of the Court of Tax Appeals and from there to the Court of Appeals. The rule that Regional Trial Courts have no review powers over such proceedings is anchored upon the policy of placing no unnecessary hindrance on the governments drive, not only to prevent smuggling and other frauds upon Customs, but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform.35 Thus, the RTC had no jurisdiction to take cognizance of the petition for replevin by respondents herein, issue the writ of replevin and order its enforcement. The Collector of Customs had already seized the vehicles and set the sale thereof at public auction. The RTC should have dismissed the petition for replevin at the outset. By granting the plea of respondents (plaintiffs below) for the seizure of the vehicles and the transfer of custody to the court, the RTC acted without jurisdiction over the action and the vehicles subject matter thereof. It bears stressing that the forfeiture of seized goods in the Bureau of Customs is a proceeding against the goods and not against the owner. It is in the nature of a proceeding in rem, i.e., directed against the res or imported articles and entails a determination of the legality of their importation. In this proceeding, it is, in legal contemplation, the property itself which commits the violation and is treated as the offender, without reference whatsoever to the character or conduct of the owner.36 In fine, the initial orders of the RTC granting the issuance of the writ of replevin and its implementation are void.37 While it is true that the District Collector of Customs allowed the release of the vehicles and the transfer thereof to the custody of the RTC upon the payment by the private respondents of the required taxes, duties and charges, he did not thereby lose jurisdiction over the vehicles; neither did it vest jurisdiction on the RTC to take cognizance of and assume jurisdiction over the petition for replevin. As very well explained by the Office of the Solicitor General, the District Collector of Customs agreed to transfer the vehicles to the custody of the RTC since the latter had ordered the arrest of those who would obstruct the implementation of the writ. The District Collector of Customs had yet to resolve whether to order the vehicles forfeited in favor of the government, in light of the opinion of the Secretary of Justice that, under RA No. 8506, the importation was illegal. The RTC cannot be faulted for dismissing petitioners complaint-in-intervention. Considering that it had no jurisdiction over respondents action and over the shipment subject of the complaint, all proceedings before it would be void.38 The RTC had no jurisdiction to take cognizance of the complaint-in-intervention and act thereon except to dismiss the same. Moreover, considering that intervention is merely ancillary and supplemental to the existing litigation and never an independent action,39 the dismissal of the principal action necessarily results in the dismissal of the complaint-inintervention. Likewise, a court which has no jurisdiction over the principal action has no jurisdiction

over a complaint-in-intervention. Intervention presupposes the pendency of a suit in a court of competent jurisdiction.40 Jurisdiction of intervention is governed by jurisdiction of the main action.41 IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Court of Appeals Decision in CAG.R. SP No. 61562 is AFFIRMED. SO ORDERED. Panganiban, C.J. (Chairperson), Ynares-Santiago, Austria-Martinez, and Chico-Nazario, JJ., concur.

G.R. No. L-29043 January 30, 1971 HON. JUAN PONCE ENRILE, Commissioner of Customs and LT. GENERAL PELAGIO A. CRUZ, (Ret.) Chairman, Anti-Smuggling Action Center (ASAC), petitioners, vs. ANDRES M. VINUYA and HON. WALFRIDO DE LOS ANGELES, presiding judge of Branch IV, Court of First Instance of Rizal (sitting at Quezon City), respondents. Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Antonio A. Torres and Solicitor Augusto M. Amores for petitioners. Alfredo B. Concepcion for respondents.

FERNANDO, J.: The crucial question presented in this certiorari and prohibition proceeding, petitioners being the then Commissioner of Customs, the Honorable Juan Ponce Enrile as well as the Chairman of the Anti-Smuggling Action Center (ASAC), General Pelagio A. Cruz, is whether Judge Walfrido de los Angeles is vested with jurisdiction to entertain a complaint for replevin filed by the other respondent, Andres M. Vinuya, for the recovery of a Cadillac car, subject of a seizure and forfeiture proceeding. Ever since Pacis v. Averia1 the answer has not been in doubt. The matter of seizure and forfeiture is the exclusive concern of the Collector of Customs, a court of first instance lacking power in the premises. Nonetheless, the plea that in this particular case respondent Judge acted within the limits of his authority is predicated on the alleged illegality of the seizure which, in the opinion of respondents, did not confer jurisdiction on the Collector of Customs. Such a contention which loses sight of the vital distinction between the existence of authority and the mode of its exercise does not suffice to call for a different ruling. We reiterate the principle of the exclusive jurisdiction of the Collector of Customs in seizure and forfeiture proceedings. We grant the petition. From the petition filed on May 28, 1968, it would appear that upon the application of the ASAC on February 9, 1968, the then Collector of Customs of the Port of Manila issued a warrant of seizure and detention against the Cadillac car involved in this case, the owner-

claimant being a certain Rodolfo Ceadoza, as the taxes and duties had not been paid. The warrant was served and enforced on April 2, 1968 prior to the filing of a complaint for replevin with respondent Judge. The circumstances indicative of the alleged failure to pay such taxes and duties on the CadiIlac car are set forth in the petition thus: "(a) In securing the registration of said car, Rodolfo Ceadoza predecessor-in-interest of respondent Andres M. Vinuya, used Informal Entry No. 1563652 dated May 9, 1967 and Certificate of Payment No. 10868 in the amount of P1,305.00, both of the Bureau of Customs, but upon checking the records of the Land Transportation Commission, it was found that said informal entry and certificate of payment corresponded to a 1961 Fiat 600, and not to the Cadillac car in dispute; (b) The person who paid the said taxes and duties is one Pablo Cruz, Jr., who does not appear to be one of the predecessors-in-interest of respondent Vinuya; (c) As shown by Annex B hereof, when the Cadillac car was seized and detained by ASAC agents, its plate license was No. H-37264 (67) Rizal, and not Plate No. 35905 (67) Rizal, which was its plate number when it was allegedly registered; (d) On February 14, 1968, a certain Jess O. Tuazon, General Manager of the Lee Sabre Car Exchange, Manila, executed an affidavit ..., to the effect that Rodolfo Ceadoza had left the said car in his possession for the purpose of selling the same and that the affiant had obligated himself to 'waive my (his) rights to sell the above-mentioned car not until the proper taxes due to the government has been satisfactorily paid'; (e) On February 15, 1968, said Jess Tuazon, who then had possession of the said Cadillac car, through his lawyer, Thomas S. Cortez, executed a promissory note ..., obligating himself to pay the corresponding taxes and duties."2
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It was moreover shown in the petition that the owner, Rodolfo Ceadoza, had sold such car to one Francisco Dee from whom respondent Vinuya acquired the same.3 Under claim that he was aggrieved by such seizure and detention of the car in question, respondent Vinuya filed a complaint for replevin in the sala of respondent Judge.4 After filing a bond of P60,000.00 an ex-parte order was issued on April 19, 1967 by respondent Judge directing a special sheriff to take possession of the Cadillac car in question.5 On the very same day respondent Judge likewise gave due course to the complaint for replevin and required petitioners to file their answer. 6 There was, on the part of petitioners, a motion to dismiss as well as to lift the ex-parte order. In seeking such dismissal, the attention of respondent Judge was invited to the fact that forfeiture proceedings had already been instituted before the Collector of Customs who has the sole jurisdiction to determine questions affecting the disposition of property under seizure as well as the absence of a cause of action.7 There was an opposition by respondent Vinuya filed on May 7, 1968 and a denial thereof in an order of respondent Judge on the ground that such motion to dismiss "is without merit." The matter was thus taken to this Court. In our resolution of June 4, 1968, respondents were required to answer; at the same time a preliminary injunction was issued. In the answer filed on July 11, 1968, there was an admission that on February 9, 1968, the Collector of Customs of the Port of Manila issued a warrant of seizure and detention against the Cadillac car, but there was a denial that the registration covering the car was illegally secured as respondent Vinuya relied on what appeared to be a public document valid and regular on its face. They base their defense in the illegality of the seizure as the warrant on which it is based is invalid and the seizing

officer was devoid of authority; respondents' principal contention thus is the assertion that an illegal seizure cannot confer jurisdiction on the Collector of Customs. From a study of the records of the case as well as the applicable law, the conclusion reached by us, as mentioned at the outset, is that the petition should be granted. 1. The prevailing doctrine is that the exclusive jurisdiction in seizure and forfeiture cases vested in the Collector of Customs precludes a court of first instance from assuming cognizance over such a matter. This has been so, as noted, since Pacis v. Averia.8 In an opinion penned by Justice J. P. Bengzon, there was a statement of the legal provisions that call for application. Thus: "The Tariff and Customs Code, in Section 2530 thereof, lists the kinds of property subject to forfeiture. At the same time, in Part 2 of Title VI thereof, it provides for the procedure in seizure and forfeiture cases and vests in the Collector of Customs the authority to hear and decide said cases. The Collector's decision is appealable to the Commissioner of Customs whose decision is in turn appealable to the Court of Tax Appeals. An aggrieved party may appeal from a judgment of the Court of Tax Appeals directly to this Court. On the other hand, Section 44(c) of the Judiciary Act of 1948 lodges in the Court of First Instance original jurisdiction in all cases in which the value of the property in controversy amounts to more than ten thousand pesos. This original jurisdiction of the Court of First Instance, when exercised in an action for recovery of personal property which is a subject of a forfeiture proceeding in the Bureau of Customs, tends to encroach upon, and to render futile, the jurisdiction of the Collector of Customs in seizure and forfeiture proceedings. This is precisely what took place in this case. The seizure and forfeiture proceedings against the M/B 'Bukang Liwayway' before the Collector of Customs of Manila, was stifled by the issuance of a writ of replevin by the Court of First Instance of Cavite."9
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The crucial question whether Section 44 (c) of the Judicial Act should give way to the provisions of the Tariff and Customs Code was answered in the affirmative, the opinion clearly stating that "the Court of First Instance should yield to the jurisdiction of the Collector of Customs. The jurisdiction of the Collector of Customs is provided for in Republic Act 1937 which took effect on July 1, 1957, much later than the Judiciary Act of 1948. It is axiomatic that a later law prevails over a prior statute. Moreover, on grounds of public policy, it is more reasonable to conclude that the legislators intended to divest the Court of First Instance of the prerogative to replevin a property which is a subject of a seizure and forfeiture proceedings for violation of the Tariff and Customs Code. Otherwise, actions for forfeiture of property for violation of Customs laws could easily be undermined by the simple devise of replevin." 10 This excerpt from the opinion is likewise relevant: "Furthermore, Section 2303 of the Tariff and Customs Code requires the Collector of Customs to give to the owner of the property sought to be forfeited written notice of the seizure and to give him the opportunity to be heard in his defense. This provision clearly indicates the intention of the law to confine in the Bureau of Customs the determination of all questions affecting the disposal of property proceeded against in a seizure and forfeiture case. The judicial recourse of the property owner is not in the Court of First Instance but in the Court of Tax Appeals, and only after exhausting administrative remedies in the Bureau of Customs." 11 The principle was reiterated in an opinion of the present Chief Justice in De Joya v. David. 12 Thus: "As regards the merits of this case, it is obvious that the Court of First

Instance of Manila had no jurisdiction over the subject-matter of Civil Case No. 56533 thereof, and that neither had the Court of Appeals jurisdiction over the appeal taken from the decision of said trial Court. Indeed, in said Case No. 56533 David sought to obtain possession of the goods which were the object of seizure proceedings before the Collector of Customs. We have already held that such action is beyond the jurisdiction of courts of first instance." 13 Papa v. Mago 14 likewise deserves to be cited. The opinion of Justice Zaldivar for the Court emphatically asserted the doctrine anew in the following language: "It is the settled rule, therefore, that the Bureau of Customs acquires exclusive jurisdiction over imported goods, for the purposes of enforcement of the customs laws, from the moment the goods are actually in its possession or control, even if no warrant of seizure or detention had previously been issued by the Collector of Customs in connection with seizure and forfeiture proceedings. In the present case, the Bureau of Customs actually seized the goods in question on November 4, 1966, and so from that date the Bureau of Customs acquired jurisdiction over the goods for the purposes of the enforcement of the tariff and customs laws, to the exclusion of the regular courts. Much less than would the Court of First Instance of Manila has jurisdiction over the goods in question after the Collector of Customs had issued the warrant of seizure and detention on January 12, 1967. And so, it cannot be said, as respondents contend, that the issuance of said warrant was only an attempt to divest the respondent Judge of jurisdiction over the subject matter of the case. The court presided by respondent Judge did not acquire jurisdiction over the goods in question when the petition for mandamus was filed before it, and so there was no need of divesting it of jurisdiction. Not having acquired jurisdiction over the goods, it follows that the Court of First Instance of Manila had no jurisdiction to issue the questioned order of March 7, 1967 releasing said goods."15 2. Respondents, however, notwithstanding the compelling force of the above doctrines, would assert that respondent Judge could entertain the replevin suit as the seizure is illegal, allegedly because the warrant issued is invalid and the seizing officer likewise was devoid of authority. This is to lose sight of the distinction, as earlier made mention of, between the existence of the power and the regularity of the proceeding taken under it. The governmental agency concerned, the Bureau of Customs, is vested with exclusive authority. Even if it be assumed that in the exercise of such exclusive competence a taint of illegality may be correctly imputed, the most that can be said is that under certain circumstances the grave abuse of discretion conferred may oust it of such jurisdiction. It does not mean however that correspondingly a court of first instance is vested with competence when clearly in the light of the above decisions the law has not seen fit to do so. The proceeding before the Collector of Customs is not final. An appeal lies to the Commissioner of Customs and thereafter to the Court of Tax Appeals. It may even reach this Court through the appropriate petition for review. The proper ventilation of the legal issues raised is thus indicated. Certainly a court of first instance is not therein included. It is devoid of jurisdiction.
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WHEREFORE, the writ of certiorari prayed for is granted, respondent Judge being clearly without jurisdiction. As a result whereof, the orders complained of are set aside and declared to be without any force or effect. The writ of prohibition is likewise granted restraining respondent Judge from otherwise proceeding and continuing in any manner

whatsoever in said Civil Case No. Q-12025 pending in his sala which he is required to dismiss. The writ of preliminary injunction issued by this Court is made permanent. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Teehankee, Villamor and Makasiar, JJ., concur. Barredo, J., took no part.

G.R. No. 138081

March 30, 2000

THE BUREAU OF CUSTOMS (BOC) and THE ECONOMIC INTELLIGENCE AND INVESTIGATION BUREAU (EIIB),petitioners, vs. NELSON OGARIO and MARK MONTELIBANO, respondents.

MENDOZA, J.: The question for decision in this case is whether the Regional Trial Court has jurisdiction to enjoin forfeiture proceedings in the Bureau of Customs. In accordance with what is now settled law, we hold it does not. The facts are as follows: On December 9, 1998, Felipe A. Bartolome, District Collector of Customs of Cebu, issued a Warrant of Seizure and Detention1 of 25,000 bags of rice, bearing the name of SNOWMAN, Milled in Palawan" shipped on board the M/V "Alberto", which was then docketed at Pier 6 in Cebu City. The warrant was issued on the basis of the report of the Economic Intelligence and Investigation Bureau (EIIB), Region VII that the rice had been illegally imported. The report stated that the rice was landed in Palawan by a foreign vessel and then placed in sacks marked "SNOWMAN," Milled in Palawan." It was then shipped to Cebu City on board the vessel M/V "Alberto." Forfeiture proceedings were started in the customs office in Cebu, docketed as Cebu Seizure Identification Case No. 1798. On December 10, 1998, respondent Mark Montelibano, the consignee of the sacks of rice, and his buyer, respondent Elson Ogario, filed a complaint for injunction (Civil Case No. CEB-23077) in the Regional Trial Court of Cebu City, alleging: 4.) That upon arrival of the herein-mentioned sacks of rice at the PIER 5 of Cebu City, Philippines on the 7th day of December 1998 all of the defendants rushed to the port with long arms commanding the plaintiff's laborer[s] to stopped [sic] the unloading of the same from the vessel named M/V Alberto. The defendants alleged that the herein-mentioned rice were [sic] smuggled from abroad without even proof that the same were [ sic] purchased from a particularly country.

5.) By the mere suspicion of the defendants that the goods were smuggled from abroad, they immediately put on hold the release of the goods from the ship and at the same time they jointly barred unloading and loading activities of the plaintiffs' laborers of the hereinmentioned rice. 6.) The plaintiffs then presented all the pertinent and necessary documents to all of the defendants but the latter refused to believe that the same is from Palawan because their minds are closed due to some reason or another Civil [while] the plaintiffs believed that the same is merely an act of harassment. The documents are as follows: A.) Certification from the National Food Authority that the same is from Palawan. This is hereto attached Annex A. B) Bill of Lading issued by ANMA PHILIPPINES Shipping Company. This is hereto attached as Annex B. 7.) The acts of the defendants in stopping he loading and unloading activities of the plaintiff's laborers [have] no basis in law and in fact; thus, unlawful and illegal. A mere suspicious which is not coupled with any proof or evidence to that effect is [a] matter which the law prohibits. 8.) That for more than three days and despite the repeated plea of the plaintiffs that their goods should be released to them and the defendants should stop from barring the unloading and loading activities, the latter blindly refused [to] heed the same. 9.) That the acts of all of the defendants which are greatly unlawful and erroneous would caused [sic] irreparable damage, injury, and grave injustices to the plaintiffs. 10.) That by way of example or correction for the public good and to deter the defendants from doing the same acts to other businessmen, defendants should be held liable for exemplary damages in amount of not less than One Hundred Thousand Pesos (P100,000.00). 11.) That the plaintiffs are entitled to the relief prayed in this complaint and the whole or part of such reliefs consists in restraining perpetually the defendants from holding the hereinmentioned twenty-five thousand sacks of rice. That defendants should be restrained perpetually from barring the unloading and loading activities of the plaintiffs' laborers. 12.) That allowing the defendants to continue their unlawful acts would work grave injustice to the plaintiffs. Unless a preliminary injunction be granted ex-parte, grave and irreparable injury and damage would result to the plaintiffs before the latter can be heard on notice. 13.) That if the defendants be not restrained perpetually from their unlawful acts, the hereinmentioned rice will deteriorate and turn into dusts [sic] if not properly disposed.
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14.) That a Warrant of Seizure and detention issued by the Collector of Custom[s] dated December 9, 1998 be quashed because the defendants' act of seizing and detaining the herein-mentioned sacks of rice are illegal. The continuing act of detaining the herein-

mentioned sacks of rice will led to the deterioration of the same. That no public auction sale of the same should be conducted by the Bureau of Custom[s] or any government agenc[y] . 15.) That plaintiffs are ready and willing to file a bond executed to the defendants in an amount to be fixed by this Honorable Court to the effect that plaintiffs will pay to the defendants all damages which they may sustain by reason of the injunction if this Honorable Court should finally decide that the plaintiffs are not entitled thereto. PRAYER WHEREFORE, Premised on the foregoing, it is most respectfully prayed before this Honorable Court that a restraining order or temporary injunction be immediately issued prohibiting the defendants from holding plaintiffs' above-mentioned goods. That it is further prayed that a restraining order or temporary injunction be issued prohibiting the defendants from barring the unloading and loading activities of the plaintiffs' laborers. Further, the plaintiffs prayed that the warrant of seizure and detention issued by the Collector of Custom[s] dated December 9, 1998 be quashed and no public auction sale of the same should be conducted by any government agency or authority. It is further prayed that after due hearing, judgment be rendered: 1.) Making the restraining order and/or preliminary injunction permanent. 2.) Ordering the defendants jointly to pay exemplary or corrective damages to the plaintiff[s] in the amount of One Hundred Thousand Pesos (P100,000.00) Such other relief which are just and demandable under the circumstances are also prayed for.In separate motions, petitioners Bureau of Customs (BOC), Port of Cebu3 and the EIIB, as well as the Philippine Navy and Coast Guard, sought the dismissal of the complaint on the ground that the RTC had no jurisdiction, but their motions were denied. In its resolution, dated January 11, 1999, the RTC said: The Warrant of Seizure and Detention issued by the Bureau of Customs cannot divest this court of jurisdiction since its issuance is without legal basis as it was anchored merely on suspicion that the items in question were imported or smuggled. It is very clear that the defendants are bereft of any evidence to prove that the goods were indeed imported or smuggled, that is why the plaintiffs have very vigorously protested against the seizure of cargoes by the defendants. In fact, as revealed by defendants' counsel, the Warrant of Seizure and Detention was issued merely to shift the burden of proof to the shippers or owners of the goods to prove that the bags of rice were not imported or smuggled. However, the court feels this is unfair because the settled rule is that he who alleges must prove the same. Besides, at this time when our economy is not good, it would be a [dis]service to the nation to use the strong arm of the law to make things hard or difficult for the businessmen.4

The 25,000 bags of rice were ordered returned to respondents upon the posting by them of an P8,000,000.00 bond. Petitioners BOC and EIIB moved for a reconsideration, but their motion was denied by the RTC in its order dated January 25, 1999.5 In the same order, the RTC also increased the amount of respondents' bond to P22,500,000.00. On certiorari to the Court of Appeals, the resolution and order of the RTC were sustained.6 Accordingly, on April 26, 1999, upon motion of respondents, the RTC ordered the sheriff to place in respondents' possession the 25,000 bags of rice. Meanwhile, in the forfeiture proceedings before the Collector of Customs of Cebu (Cebu Seizure Identification Case No. 17-98), a decision was rendered, the dispositive portion of which reads: WHEREFORE, by virtue of the authority vested in me by law, it is hereby ordered and decreed that the vessel M/V "Alberto"; the 25,000 bags of rice brand "Snowman"; and the two (2) trucks bearing Plate Nos. GCC 844 and GHZ 388 are all FORFEITED in favor of the government to be disposed of in the manner prescribed by law while the seven (7) trucks bearing Plate Nos. GFX 557; GFX 247; TPV 726; GBY 874; GVE 989; and GDF 548 are RELEASED in favor of their respective owners upon proper identification and compliance with pertinent laws, rules and regulations. Since this decision involves the release of some of the articles subject matter of herein case which is considered adverse to the government, the same is hereby elevated to the Commissioner of Customs for automatic review pursuant to Republic Act 7651. 7 The District Collector of Customs found "strong reliable, and convincing evidence" that the 25,000 bags of rice were smuggled. Said evidence consisted of certifications by the Philippine Coast Guard, the Philippine Ports Authority, and the Arrastre Stevedoring Office in Palawan that M/V "Alberto" had never docked in Palawan since November, 1998; a certification by Officer-in-Charge Elenita Ganelo of the National Food Authority (NFA) Palawan that her signature in NFA Grains Permit Control No. 00986, attesting that the 25,000 bags of rice originated from Palawan, was forged; and the result of the laboratory analysis of a sample of the subject rice by the International Rice Research Institute (IRRI) stating that the sample "does not compare with any of our IRRI released varieties." Respondent Montelibano did not take part in the proceedings before the District Collector of Customs despite due notice sent to his counsel because he refused to recognize the validity of the forfeiture proceedings.8 On April 30, 1999, petitioners filed the present petition for review on certiorari of the decision of the Court of Appeals, dated April 15, 1999, upholding the resolution of the RTC denying petitioners' motions to dismiss. They contend that:

I. SINCE THE REGIONAL TRIAL COURT OF CEBU CITY DOES NOT HAVE JURISDICTION OVER THE SUBJECT MATTER OF THE INSTANT CONTROVERSY, AND THE BUREAU OF CUSTOMS HAD ALREADY EXERCISED EXCLUSIVE ORIGINAL JURISDICTION OVER THE SAME, THE COURT OF APPEALS SERIOUSLY ERRED IN SUSTAINING THE EXERCISE BY THE TRIAL JUDGE OF JURISDICTION OVER THE CASE BELOW AND IN AFFIRMING THE TRIAL JUDGE'S RESOLUTION DATED JANUARY 11, 1999 AND ORDER DATED JANUARY 25, 1999 IN CIVIL CASE NO. CEB-23077. II. SINCE RESPONDENTS HAVE NOT EXHAUSTED ALL THE ADMINISTRATIVE REMEDIES PROVIDED FOR BY LAW, THE COURT OF APPEALS SERIOUSLY ERRED IN UPHOLDING THE TRIAL JUDGE'S DENIALS OF PETITIONERS' SEPARATE MOTIONS TO DISMISS AND MOTIONS FOR RECONSIDERATION.9 In Jao v. Court of Appeals, 10 this Court, reiterating its ruling in a long line of cases, said: There is no question that Regional Trial Courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with these proceedings. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. The Regional Trial Courts are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition ormandamus. It is likewise well-settled that the provisions of the Tariff and Customs Code and that of Republic Act No. 1125, as amended, otherwise known as "An Act Creating the Court of Tax Appeals," specify the proper fora and procedure for the ventilation of any legal objections or issues raised concerning these proceedings. Thus, actions of the Collector of Customs are appealable to the Commissioner of Customs, whose decision, in turn, is subject to the exclusive appellate jurisdiction of the Court of Tax Appeals and from there to the Court of Appeals. The rule that Regional Trial Courts have no review powers over such proceedings is anchored upon the policy of placing no unnecessary hindrance on the government's drive, not only to prevent smuggling and other frauds upon Customs, but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform.

Even if the seizure by the Collector of Customs were illegal, which has yet to be proven, we have said that such act does not deprive the Bureau of Customs of jurisdiction thereon. Respondents cite the statement of the Court of Appeals that regular courts still retain jurisdiction "where, as in this case, for lack of probable cause, there is serious doubt as to the propriety of placing the articles under Customs jurisdiction through seizure/forfeiture proceedings" 11 They overlook the fact, however, that under the law, the question of whether probable cause exists for the seizure of the subject sacks of rice is not for the Regional Trial Court to determine. The customs authorities do not have to prove to the satisfaction of the court that the articles on board a vessel were imported from abroad or are intended to be shipped abroad before they may exercise the power to effect customs' searches, seizures, or arrests provided by law and continue with the administrative hearings. 12 As the Court held in Ponce Enrile v. Vinuya: 13 The governmental agency concerned, the Bureau of Customs, is vested with exclusive authority. Even if it be assumed that in the exercise of such exclusive competence a taint of illegality may be correctly imputed, the most that can be said is that under certain circumstances the grave abuse of discretion conferred may oust it of such jurisdiction. It does not mean however that correspondingly a court of first instance is vested with competence when clearly in the light of the above decisions the law has not seen fit to do so. The proceeding before the Collector of Customs is not final. An appeal lies to the Commissioner of Customs and thereafter to the Court of Tax Appeals. It may even reach this Court through the appropriate petition for review. The proper ventilation of the legal issues raised is thus indicated. Certainly a court of first instance is not therein included. It is devoid of jurisdiction. It is noteworthy that because of the indiscriminate issuance of writs of injunction, the Supreme Court issued on June 25, 1999 Administrative Circular No. 07-99 to all judges of lower courts entitled EXERCISE OF UTMOST CAUTION, PRUDENCE, AND JUDICIOUSNESS IN ISSUANCE OF TEMPORARY RESTRAINING ORDERS AND WRITS OF PRELIMINARY INJUNCTION. The circular states in part: Finally, judges should never forget what the Court categorically declared in Mison v. Natividad (213 SCRA 734, 742 [1992]) that "[b]y express provision of law, amply supported by well-settled jurisprudence, the Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings, and regular courts cannot interfere with his exercise thereof or stifle or put it to naught. The Office of the Court Administrator shall see to it that this circular is immediately disseminated and shall monitor implementation thereof.
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STRICT OBSERVANCE AND COMPLIANCE of this Circular is hereby enjoined.

WHEREFORE, the temporary restraining order issued on May 17, 1999 is hereby made permanent. The decision, dated April 15, 1999, of the Court of Appeals is REVERSED and Civil Case No. CEB-23077 in the Regional Trial Court, Branch 5, Cebu City is DISMISSED. SO ORDERED. Bellosillo, Quisumbing, Buena and De Leon, Jr., JJ., concur.

G.R. No. L-43810 September 26, 1989 TOMAS CHIA, Owner-Manager of the Sony Merchandising (Phil.) of No. 691 Calle Raon, Quiapo, Manila, and TOM'S ELECTRONICS of No. 690 Calle Raon, Quiapo, Manila, petitioner, vs. THE ACTING COLLECTOR OF CUSTOMS, HON ALFREDO T. FRANCISCO, Port Area, Manila, and, GENER SULA ASAC, Camp Emilio Aguinaldo, Quezon City, respondents. Eliseo P. Legaspi for petitioner.

GRIO-AQUINO, J.: This petition for certiorari, prohibition, mandamus and injunction seeks: (1) to nullify the warrants of seizure and detention issued and signed by the Collector of Customs; and (2) to recover the confiscated goods seized under these general warrants, as well as damages. Acting on a verified report of a confidential informant that assorted electronic and electrical equipment and other articles illegally imported into the Philippines by a syndicate engaged in unlawful "shipside" activities (foreign goods are unloaded from foreign ships in transit through Philippine waters into motorized bancas and landed on Philippine soil without passing through the Bureau of Customs, thereby evading payment of the corresponding customs duties and taxes thereon) were found inside "Tom's Electronics" and "Sony Merchandising (Philippines)" stores located at 690 and 691 Gonzalo Puyat corner Evangelista Street, Quiapo, Manila, a letter- request dated April 23, 1976 was addressed to the Collector of Customs by the Deputy Director of the Regional Anti-Smuggling Action Center, Manila Bay Area (RASAC-MBA) for the issuance of warrants of seizure and detention. After evaluation, the Collector of Customs issued Warrants of Seizure and Detention Nos: 14925 and 14925-A, directing the Anti-Smuggling Action Center to seize the goods mentioned therein, which read as follows: Republic of the Philippines, _ versus Various electronic equipments like cassette tape recorders,

car stereos, phonograph needles (diamond), portable TV sets, imported long playing records, spare parts of TVs and radios and other electrical appliances. TOM'S ELECTRONICS Claimant Seizure Identification No. 14925-A SONY MERCHANDISING (PHIL.) Claimant Seizure Identification No. 14925 To: The Director or his duly-authorized representative ASAC Camp Aguinaldo, Quezon City GREETINGS: WHEREAS, the above-described articles are liable for forfeiture for having been imported in violation of Section 2536 of the Tariff and Customs Code as amended in relation to Section 2530 (m)-l of the same Code; WHEREAS, the said articles are at present in the custody of Tom's Electronics/Sony Merchandising (Phil.); WHEREFORE, by virtue of the authority vested in me by law and in compliance with Finance Department Order No. 96-67 as published in Customs Memorandum Circular No. 133-67 dated July 25, 1967, you are hereby ordered to forthwith seize the aforementioned articles and turn them over to the custody of the Auction and Cargo Disposal Division of this Bureau. (Annexes A & A-1, pp. 10-11, Rollo.) A RASAC team was formed and given a mission order to enforce the warrants, which it implemented with the assistance of: (1) the National Customs Police (augmenting the team with two members), (2) the Detective Bureau of the Manila Western Police District Headquarters (with three detectives), as well as, (3) Precinct 3 of the Manila Western Police District which exercised jurisdictional control over the place to be raided. The intended raid was entered in the respective police blotters of the police detective bureaus. On the strength of the warrants of seizure and detention, the raid was conducted in the afternoon of April 25,1976 at the two stores of the petitioner. ASAC team leader Gener Sula, together with his agents Badron Dobli, Arturo Manuel, Rodolfo Molina and Servillano Florentin of Camp Aguinaldo, Quezon City, assisted by two customs policemen, Val Martinez and Renato Sorima, and Manila policemen Rogelio Vinas and John Peralta, recovered from the stores, assorted electronic equipment and other articles, listed in Annex B of the petition, the customs duties on which allegedly had not been paid (p. 12, Rollo).

They were turned over to the Customs Auction ana Cargo Disposal Unit of the Bureau of Customs. On May 17, 1976, in the afternoon, the hearing officer of Acting Collector of Customs Alfredo Francisco conducted a hearing on the confiscation of the goods taken by Gener Sula and his agents. Two days later, petitioner Tomas Chia filed this petition for certiorari, prohibition and mandamus to enjoin the Collector of Customs and/or his agents from further proceeding with the forfeiture healing and prayed that the search warrants be declared null and void, that the respondents be ordered to return the confiscated articles to the petitioner, and to pay damages. Upon filing a Pl,000-bond, the Court issued a writ of preliminary injunction to stop the forfeiture proceedings. The pivotal issue raised in the petition is whether the warrants of seizure and detention (or Seizure Identifications Nos.14925 and 14925-A) are general warrants issued in violation of Rule 126, Section 3, of the Rules of Court which provides that: A search warrant shall not issue but upon probable cause in connection with one specific offense to be determined by the judge or justice of the peace after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched and the persons or things to be seized. No search warrant shall issue for more than one specific offense. and under Section 3 of the Bill of Rights of the 1973 Constitution which provided that: The right of the people to be secured in their persons, houses, papers and effects against unreasonable searches and seizures of whatever nature and for any purpose shall not be violated, and no search warrant or warrant of arrest shall issue except upon probable cause to be determined by the judge or such other responsible officer as may be authorized by law after examination under oath or affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be searched, and the persons or things to be seized (Emphasis supplied.) On the other hand, the respondents contend that the goods seized from petitioner's stores by the RASAC-MBA team were only those subject to customs duties and taxes but which were not supported by any evidence of payment of those duties and taxes. Those goods are subject to forfeiture for having been imported in violation of Section 2536 of the Tariff and Customs Code, as amended, in relation to Section 2530 (m)-l, which provides: SEC. 2536. SEIZURES OF OTHER ARTICLES-The Commissioner of Customs and Collector of Customs and/or any other customs officer, with the prior authorization in writing by the Commissioner, may demand evidence of payment of duties and taxes on foreign articles openly offered for sale or kept in storage, and if no such evidence can be produced, such articles may be seized and subjected to forfeiture proceedings: Provided, however, that

during such proceedings the person or entity from whom such articles have been seized shall be given the opportunity to prove or show the source of such articles and the payment of duties and taxes thereon. The petition is devoid of merit. Not only may goods be seized without a search and seizure warrant under Section 2536 of the Customs and Tariff Code, when they (the goods) are openly offered for sale or kept in storage in a store as in this case, but the fact is that petitioner's stores Tom's Electronics" and "Sony Merchandising (Phil.)" were searched upon warrants of search and detention issued by the Collector of Customs, who, under the 1973 Constitution, was "a responsible officer authorized by law" to issue them. Sections 2208 and 2209 of the Tariff and Customs Code provide when a search may be made without a warrant and when a warrant is necessary: SEC. 2208. RIGHT OF POLICE OFFICER TO ENTER INCLOSURE For the more effective discharge of his official duties, any person exercising the powers herein conferred, may at any time enter, pass through or search any land or inclosure or any warehouse, store or other building, not being a dwelling house. A warehouse, store or other building or inclosure used for the keeping or storage of articles does not become a dwelling house within the meaning hereof merely by reason of the fact that a person employed as watchman lives in the place, nor will the fact that his family stays there with him alter the case. SEC. 2209.- SEARCH OF A DWELLING HOUSE. A dwelling house may be entered and searched only upon warrant issued by a Judge of the court or such other responsible officers as may be authorized by law, upon sworn application showing probable cause and particularly describing the place to be searched and the person or thing to be seized. The warrants issued by the Collector of Customs in this case were not general warrants, as erroneously alleged by the petitioner for they identified the stores to be searched, described the articles to be seized and specified the provision of the Tariff and Customs Code violated. Upon effecting the seizure of the goods, the Bureau of Customs acquired exclusive jurisdiction not only over the case but also over the goods seized for the purpose of enforcing the tariff and customs laws. A party dissatisfied with the decision of the Collector may appeal to the Commissioner of Customs, whose decision is appealable to the Court of Tax Appeals in the manner and within the period prescribed by law and regulations. The decision of the Court of Tax Appeals may be elevated to the Supreme Court for review (Secs. 2309-2316; 2401 & 2402 of the Tariff and Customs Code; Collector of Customs vs. Torres, et al., 45 SCRA 272).

Since petitioner did not exhaust his administrative remedies, his recourse to this Court is premature (Acting Collector of Customs of the Port of Manila vs. Caluag, 20 SCRA 204; Laganapan vs. Asedillo, 154 SCRA 377; National Development Co. vs. Hervilla, 151 SCRA 520). If for no other reason, the petition is dismissible on that score. WHEREFORE, the petition is dismissed. The writ of preliminary injunction which we issued on May 28, 1976 is hereby lifted and set aside. Costs against petitioner. SO ORDERED. Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

G.R. No. 177188

December 4, 2008

EL GRECO SHIP MANNING AND MANAGEMENT CORPORATION, petitioner, vs. COMMISSIONER OF CUSTOMS, respondent. DECISION CHICO-NAZARIO, J.: Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitioner El Greco Ship Manning and Management Corporation (El Greco), seeking to reverse and set aside the Decision1 of the Court of Tax Appeals (CTA) En Banc dated 14 March 2007 in C.T.A. EB No. 162. In its assailed Decision, the CTA En Banc affirmed the Decision2 dated 17 October 2005 of the CTA Second Division in CTA Case No. 6618, ordering the forfeiture of the vessel M/V Criston, also known as M/V Neptune Breeze, for having been involved in the smuggling of 35,000 bags of imported rice. The factual and procedural antecedents of this case are as follows: On 23 September 2001, the vessel M/V Criston docked at the Port of Tabaco, Albay, carrying a shipment of 35,000 bags of imported rice, consigned to Antonio Chua, Jr. (Chua) and Carlos Carillo (Carillo), payable upon its delivery to Albay. Glucer Shipping Company, Inc. (Glucer Shipping) is the operator of M/V Criston.3 Upon the directive of then Commissioner Titus Villanueva of the Bureau of Customs (BOC), a Warrant of Seizure and Detention, Seizure Identification No. 06-2001, was issued by the Legaspi District Collector, on 23 September 2001 for the 35,000 bags of imported rice shipped by M/V Criston, on the ground that it left the Port of Manila without the necessary clearance from the Philippine Coast Guard. Since the earlier Warrant covered only the cargo, but not M/V Criston which transported it, a subsequent Warrant of Seizure and Detention, Seizure

Identification No. 06-2001-A, was issued on 18 October 2001 particularly for the said vessel. The BOC District Collector of the Port of Legaspi thereafter commenced proceedings for the forfeiture of M/V Criston and its cargo under Seizure Identification No. 06-2001-A and Seizure Identification No. 06-2001, respectively.4 To protect their property rights over the cargo, consignees Chua and Carillo filed before the Regional Trial Court (RTC) of Tabaco, Albay, a Petition for Prohibition with Prayer for the Issuance of Preliminary Injunction and Temporary Restraining Order (TRO) assailing the authority of the Legaspi District Collectors to issue the Warrants of Seizure and Detention and praying for a permanent injunction against the implementation of the said Warrants. Their Petition was docketed as Civil Case No. T-2170.5 After finding the Petition sufficient in form and substance and considering the extreme urgency of the matter involved, the RTC issued a 72-hour TRO conditioned upon the filing by Chua and Carillo of a bond in the amount of P31,450,000.00, representing the value of the goods. After Chua and Carillo posted the required bond, the 35,000 bags of rice were released to them.6 The Legaspi District Collector held in abeyance the proceedings for the forfeiture of M/V Criston and its cargo under Seizure Identification No. 06-2001 and Seizure Identification No. 06-2001-A pending the resolution by the RTC of Civil Case No. T-2170. When the RTC granted the Motion to Dismiss Civil Case No. T-2170 filed by the BOC, the Legaspi District Collector set the hearing of Seizure Identification No. 06-2001 and Seizure Identification No. 06-2001-A. A notice of the scheduled hearing of the aforementioned seizure cases was sent to Glucer Shipping but it failed to appear at the hearing so set. After a second notice of hearing was ignored by Glucer Shipping, the prosecutor was allowed to present his witnesses.7 In the meantime, while M/V Criston was berthing at the Port of Tabaco under the custody of the BOC, the Province of Albay was hit by typhoon "Manang." In order to avert any damage which could be caused by the typhoon, the vessel was allowed to proceed to another anchorage area to temporarily seek shelter. After typhoon "Manang" had passed through Albay province, M/V Criston, however, failed to return to the Port of Tabaco and was nowhere to be found.8 Alarmed, the BOC and the Philippine Coast Guard coordinated with the Philippine Air Force to find the missing vessel. On 8 November 2001, the BOC received information that M/V Criston was found in the waters of Bataan sporting the name of M/V Neptune Breeze.9 Based on the above information and for failure of M/V Neptune Breeze to present a clearance from its last port of call, a Warrant of Seizure and Detention under Seizure Identification No. 2001-208 was issued against the vessel by the BOC District Collector of the Port of Manila.10 For the same reasons, the Legaspi District Collector rendered a Decision on 27 June 2002 in Seizure Identification No. 06-2001 and Seizure Identification No. 06-2001-A ordering the forfeiture of the M/V Criston, also known as M/V Neptune Breeze, and its cargo, for violating Section 2530 (a), (f) and (k) of the Tariff and Customs Code.11 In the meantime, El Greco, the duly authorized local agent of the registered owner of M/V Neptune Breeze, Atlantic Pacific Corporation, Inc. (Atlantic Pacific), filed with the Manila District Collector, in Seizure Identification No. 2001-208, a Motion for Intervention and Motion to Quash Warrant of Seizure Detention with Urgent Prayer for the Immediate Release of M/V Neptune Breeze. El Greco claimed that M/V Neptune Breeze was a foreign registered vessel owned by

Atlantic Pacific, and different from M/V Criston which had been involved in smuggling activities in Legaspi, Albay.12 Acting favorably on the motion of El Greco, the Manila District Collector issued an Order13 dated 11 March 2002 quashing the Warrant of Seizure and Detention it issued against M/V Neptune Breeze in Seizure Identification No. 2001-208 for lack of probable cause that the said vessel was the same one known as M/V Criston which fled from the jurisdiction of the BOC Legaspi District after being seized and detained therein for allegedly engaging in smuggling activities. According to the decretal part of the Manila District Collectors Order: WHEREFORE, pursuant to the authority vested in me by law, it is hereby ordered and decreed that the Warrant of Seizure and Detention issued thereof be Quashed for want of factual or legal basis, and that the vessel "M/V Neptune Brreze" be released to [El Greco] after clearance with the Commissioner of Customs, proper identification and compliance with existing rules and regulations pertinent in the premises. On automatic review by BOC Commissioner Antonio Bernardo, the Order dated 11 March 2002 of the District Collector of the Port of Manila was reversed after finding that M/V Neptune Breeze and M/V Criston were one and the same and that the Legaspi District Collector had already acquired prior jurisdiction over the vessel. The Decision dated 15 January 2003 of the BOC Commissioner, contained in his 2nd Indorsement14 to the Manila District Collector, decreed: Respectfully returned to the District Collector, POM, the within case folders in POM S. I. No. 2001-208, EL GRECO SHIP MANNING AND MANAGEMENT CORPORATION, Claimant/Intervenor, with the information that the Decision of that Port in the aforesaid case is hereby REVERSED in view of the following reasons: 1. Subject vessel MV "NEPTUNE BREEZE" and MV "CRISTON" are one and the same as shown by the vessels documents retrieved by the elements of the Philippine Coast Guard from MV "CRISTON" during the search conducted on board thereof when the same was apprehended in Tabaco, Albay, indicating therein the name of the vessel MV "NEPTUNE BREEZE," the name of the master of the vessel a certain YUSHAWU AWUDU, etc. These facts were corroborated by the footage of ABS-CBN taken on board the vessel when the same was subjected to search. 2. Hence, prior jurisdiction over the said vessel was already acquired by the Port of Legaspi when the said Port issued WSD S.I. No. 06-2001-A and therefore, the Decision of the latter Port forfeiting the subject vessel supercedes the Decision of that Port ordering its release. Seeking the reversal of the Decision dated 15 January 2003 of the BOC Commissioner, El Greco filed a Petition for Review with the CTA which was lodged before its Second Division as CTA Case No. 6618. El Greco averred that the BOC Commissioner committed grave abuse of discretion in ordering the forfeiture of the M/V Neptune Breeze in the absence of proof that M/V Neptune Breeze and M/V Criston were one and the same vessel.15 According to El Greco, it was highly improbable that M/V Criston was merely assuming the identity of M/V Neptune Breeze in order to evade liability since these were distinct and separate vessels as evidenced by their Certificates of Registry. While M/V Neptune Breeze was registered in St. Vincent and the Grenadines16 as shown in its Certificate of Registry No. 7298/N, M/V Criston was registered in

the Philippines. Additionally, El Greco argued that the Order dated 11 March 2002 of the Manila District Collector already became final and executory for failure of the BOC Commissioner to act thereon within a period of 30 days in accordance with Section 2313 of the Tariff and Customs Code. On 17 October 2005, the CTA Second Division rendered a Decision17 in CTA Case No. 6618 sustaining the 15 January 2003 Decision of the BOC Commissioner ordering the forfeiture of M/V Neptune Breeze. Referring to the crime laboratory report submitted by the Philippine National Police (PNP) stating that the serial numbers of the engines and the generators of both M/V Criston and M/V Neptune Breeze were identical, the CTA Second Division concluded that both vessels were indeed one and the same vessel. The CTA Second Division further ruled that nothing in the provisions of Section 2313 of the Tariff and Customs Code could buttress El Grecos contention that the Order dated 11 March 2002 of the Manila District Collector already became final and executory. The dispositive portion of the Decision of the CTA Second Division reads: WHEREFORE, premises considered, the present Petition for Review is hereby DISMISSED. The Decision in the 2nd Indorsement dated January 15, 2003 of then Commissioner Bernardo is herebyAFFIRMED.18 In a Resolution19 dated 7 February 2006, the CTA Second Division denied the Motion for Reconsideration of El Greco for failure to present issues that had not been previously threshed out in its earlier Decision. Undaunted, El Greco elevated its case to the CTA En Banc through a Petition for Review, docketed as C.T.A. EB No. 162, this time lamenting that it was being deprived of its property without due process of law. El Greco asserted that the CTA Second Division violated its constitutional right to due process when it upheld the forfeiture of M/V Neptune Breeze on the basis of the evidence presented before the Legaspi District Collector in Seizure Identification No. 06-2001 and Seizure Identification No. 06-2001-A, of which El Greco was not notified and in which it was not able to participate.20 In its Decision21 promulgated on 14 March 2007, the CTA En Banc declared that the CTA Second Division did not commit any error in its disquisition, and dismissed the Petition of El Greco in C.T.A. EB No. 162 for lack of merit. According to the CTA En Banc, the appreciation and calibration of evidence on appeal (from the ruling of the BOC) lies within the sound discretion of its Division, and the latters findings and conclusions cannot be set aside unless it has been sufficiently shown that they are not supported by evidence on record. The CTA En Banc thus disposed: WHEREFORE, the instant petition is hereby DISMISSED. Accordingly, the assailed Decision promulgated on October 17, 2005 and Resolution dated February 7, 2006 of the Second Division of this Court, are hereby AFFIRMED.22 Without filing a Motion for Reconsideration with the CTA, El Greco already sought recourse before this Court via this Petition for Review on Certiorari, raising the following issues: I. WHETHER OR NOT EL GRECO WAS DENIED OF ITS RIGHT TO DUE PROCESS.

II. WHETHER OR NOT M/V NEPTUNE BREEZE AND M/V CRISTON ARE ONE AND THE SAME VESSEL. III. WHETHER OR NOT M/V NEPTUNE BREEZE IS QUALIFIED TO BE THE SUBJECT OF FORFEITURE UNDER SECTION 2531 OF THE TARIFF AND CUSTOMS CODE. The primordial issue to be determined by this Court is whether M/V Neptune Breeze is one and the same as M/V Criston which had been detained at the Port of Tabaco, Albay, for carrying smuggled imported rice and had fled the custody of the customs authorities to evade its liabilities. El Greco insists that M/V Neptune Breeze and M/V Criston are not the same vessel. In support of its position, El Greco again presents the foreign registration of its vessel as opposed to the local registration of M/V Criston. The CTA En Banc, however, affirming the findings of the CTA Second Division, as well as the Legaspi District Collector, concluded otherwise. We sustain the determination of the CTA En Banc on this matter. Well-entrenched is the rule that findings of facts of the CTA are binding on this Court and can only be disturbed on appeal if not supported by substantial evidence.23 Substantial evidence is that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.24 A review of the records of the present case unveils the overwhelming and utterly significant pieces of evidence that more than meets the quantum of evidence necessary to establish that M/V Neptune Breeze is the very same vessel as M/V Criston, which left the anchorage area at Legaspi, Albay, without the consent of the customs authorities therein while under detention for smuggling 35,000 bags of imported rice. The crime laboratory report of the PNP shows that the serial numbers of the engines and generators of the two vessels are identical. El Greco failed to rebut this piece of evidence that decisively identified M/V Neptune Breeze as the same as M/V Criston. We take judicial notice that along with gross tonnage, net tonnage, length and breadth of the vessel, the serial numbers of its engine and generator are the necessary information identifying a vessel. In much the same way, the identity of a land motor vehicle is established by its unique motor and chassis numbers. It is, thus, highly improbable that two totally different vessels would have engines and generators bearing the very same serial numbers; and the only logical conclusion is that they must be one and the same vessel. Equally significant is the finding of the Legaspi District Collector that all the documents submitted by M/V Criston were spurious, including its supposed registration in the Philippines. In a letter dated 14 March 2002, Marina Administrator Oscar M. Sevilla attested that M/V Criston was not registered with the Marina.

Finally, Customs Guard Adolfo Capistrano testified that the features of M/V Criston and M/V Neptune Breeze were similar; while Coast Guard Commander Cirilo Ortiz narrated that he found documents inside M/V Criston bearing the name M/V Neptune Breeze. These testimonies further fortified the conclusion reached by the Legaspi District Collector that M/V Criston and M/V Neptune Breeze were one and the same. We also take note that the purported operator of M/V Criston, Glucer Shipping, was a total noshow at the hearings held in Seizure Identification No. 06-2001 and Seizure Identification No. 06-2001-A before the Legaspi District Collector. Despite being sent several notices of hearing to its supposed address, Glucer Shipping still failed to appear in the said proceedings. It becomes highly unfathomable for an owner to ignore proceedings for the seizure of its vessel, risking the loss of a property of enormous value. From the foregoing, we can only deduce that there is actually no Glucer Shipping and no M/V Criston. M/V Criston appears to be a mere fictional identity assumed by M/V Neptune Breeze so it may conduct its smuggling activities with little risk of being identified and held liable therefor. We cannot give much credence to the self-serving denial by El Greco that M/V Neptune Breeze is not the same as M/V Criston in light of the substantial evidence on record to the contrary. The foreign registration of M/V Neptune Breeze proves only that it was registered in a foreign country; but it does not render impossible the conclusions consistently reached by the Legaspi District Collector, the CTA Second Division and the CTA en banc, and presently by this Court, that M/V Neptune Breeze was the very same vessel used in the conduct of smuggling activities in the name M/V Criston. Neither can we permit El Greco to evade the forfeiture of its vessel, as a consequence of its being used in smuggling activities, by decrying denial of due process. In administrative proceedings, such as those before the BOC, technical rules of procedure and evidence are not strictly applied and administrative due process cannot be fully equated with due process in its strict judicial sense.25 The essence of due process is simply an opportunity to be heard or, as applied to administrative proceedings, an opportunity to explain one's side or an opportunity to seek reconsideration of the action or ruling complained of.26 Although it was not able to participate in the proceedings in Seizure Identification No. 06-2001 and Seizure Identification No. 06-2001-A before the Legaspi District Collector, it had ample opportunity to present its side of the controversy in Seizure Identification No. 2001-208 before the Manila District Collector. To recall, full proceedings were held before the Manila District Collector in Seizure Identification No. 2001-208. Even the evidence presented by El Greco in the latter proceedings fails to persuade. The only vital evidence it presented before the Manila District Collector in Seizure Identification No. 2001-208 was the foreign registration of M/V Neptune Breeze. It was still the same piece of evidence which El Greco submitted to this Court. Even when taken into consideration and weighed against each other, the considerably sparse evidence of El Greco in Seizure Identification No. 2001-208 could not successfully refute the substantial evidence in Seizure Identification No. 06-2001 and Seizure Identification No. 062001-A that M/V Neptune Breeze is the same as M/V Criston. Moreover, the claim of El Greco that it was denied due process flounders in light of its ample opportunity to rebut the findings of the Legaspi District Collector in Seizure Identification No. 062001 and No. 06-2001-A before the CTA Second Division in CTA Case No. 6618 and the

CTA En Banc in C.T.A. EB No. 162, and now before this Court in the Petition at bar. Unfortunately, El Greco was unable to make full use to its advantage of these repeated opportunities by offering all possible evidence in support of its case. For example, evidence that could establish that M/V Neptune Breeze was somewhere else at the time when M/V Criston was being held by customs authority at the Port of Legaspi, Albay, would have been helpful to El Grecos cause and very easy to secure, but is glaringly absent herein. After having established that M/V Neptune Breeze is one and the same as M/V Criston, we come to another crucial issue in the case at bar, that is, whether the order of forfeiture of the M/V Neptune Breeze is valid. The pertinent provisions of the Tariff and Customs Code read: SEC. 2530. Property Subject to Forfeiture Under Tariff and Customs Law. Any vehicle, vessel or aircraft, cargo, articles and other objects shall, under the following conditions, be subject to forfeiture: a. Any vehicle, vessel or aircraft, including cargo, which shall be used unlawfully in the importation or exportation of articles or in conveying and/or transporting contraband or smuggled articles in commercial quantities into or from any Philippine port or place. The mere carrying or holding on board of contraband or smuggled articles in commercial quantities shall subject such vessel, vehicle, aircraft or any other craft to forfeiture; Provided, That the vessel, or aircraft or any other craft is not used as duly authorized common carrier and as such a carrier it is not chartered or leased; xxxx f. Any article, the importation or exportation of which is effected or attempted contrary to law, or any article of prohibited importation or exportation, and all other articles which, in the opinion of the Collector, have been used, are or were intended to be used as instruments in the importation or exportation of the former; xxxx k. Any conveyance actually being used for the transport of articles subject to forfeiture under the tariff and customs laws, with its equipage or trappings, and any vehicle similarly used, together with its equipage and appurtenances including the beast, steam or other motive power drawing or propelling the same. The mere conveyance of contraband or smuggled articles by such beast or vehicle shall be sufficient cause for the outright seizure and confiscation of such beast or vehicle, but the forfeiture shall not be effected if it is established that the owner of the means of conveyance used as aforesaid, is engaged as common carrier and not chartered or leased, or his agent in charge thereof at the time has no knowledge of the unlawful act. The penalty of forfeiture is imposed on any vessel engaged in smuggling, provided that the following conditions are present: (1) The vessel is "used unlawfully in the importation or exportation of articles into or from" the Philippines;

(2) The articles are imported to or exported from "any Philippine port or place, except a port of entry"; or (3) If the vessel has a capacity of less than 30 tons and is "used in the importation of articles into any Philippine port or place other than a port of the Sulu Sea, where importation in such vessel may be authorized by the Commissioner, with the approval of the department head."27 There is no question that M/V Neptune Breeze, then known as M/V Criston, was carrying 35,000 bags of imported rice without the necessary papers showing that they were entered lawfully through a Philippine port after the payment of appropriate taxes and duties thereon. This gives rise to the presumption that such importation was illegal. Consequently, the rice subject of the importation, as well as the vessel M/V Neptune Breeze used in importation are subject to forfeiture. The burden is on El Greco, as the owner of M/V Neptune Breeze, to show that its conveyance of the rice was actually legal. Unfortunately, its claim that the cargo was not of foreign origin but was merely loaded at North Harbor, Manila, was belied by the following evidence - the Incoming Journal of the Philippine Coast Guard, Certification issued by the Department of Transportation and Communications (DOTC) Port State Control Center of Manila, and the letter dated 4 October 2001 issued by the Sub-Port of North Harbor Collector Edward de la Cuesta, confirming that there was no such loading of rice or calling of vessel occurring at North Harbor, Manila. It is, therefore, uncontroverted that the 35,000 bags of imported rice were smuggled into the Philippines using M/V Neptune Breeze. We cannot give credence to the argument of El Greco that the Order dated 11 March 2002 of the Manila District Collector, finding no probable cause that M/V Neptune Breeze is the same as M/V Criston, has already become final and executory, thus, irreversible, pursuant to Section 2313 of the Tariff and Customs Code. According to said provision: SEC. 2313. Review of Commissioner. The person aggrieved by the decision or action of the Collector in any matter presented upon protest or by his action in any case of seizure may, within fifteen (15) days after notification in writing by the Collector of his action or decision, file a written notice to the Collector with a copy furnished to the Commissioner of his intention to appeal the action or decision of the Collector to the Commissioner. Thereupon the Collector shall forthwith transmit all the records of the proceedings to the Commissioner, who shall approve, modify or reverse the action or decision of the Collector and take such steps and make such orders as may be necessary to give effect to his decision: Provided, That when an appeal is filed beyond the period herein prescribed, the same shall be deemed dismissed. If in any seizure proceedings, the Collector renders a decision adverse to the Government, such decision shall be automatically reviewed by the Commissioner and the records of the case elevated within five (5) days from the promulgation of the decision of the Collector. The Commissioner shall render a decision on the automatic appeal within thirty (30) days from receipts of the records of the case. If the Collectors decision is reversed by the Commissioner, the decision of the Commissioner shall be final and executory. However, if the Collectors decision is affirmed, or if within thirty (30) days from receipt of the record of the case by the Commissioner no decision is rendered or the decision involves imported articles whose published value is five million pesos (P5,000,000.00) or more, such decision shall be deemed automatically appealed to the Secretary of Finance and the records of the proceedings shall be elevated within five (5) days from the promulgation of the decision of the Commissioner

or of the Collector under appeal, as the case may be: Provided, further, That if the decision of the Commissioner or of the Collector under appeal as the case may be, is affirmed by the Secretary of Finance or if within thirty (30) days from receipt of the records of the proceedings by the Secretary of Finance, no decision is rendered, the decision of the Secretary of Finance, or of the Commissioner, or of the Collector under appeal, as the case may be, shall become final and executory. In any seizure proceeding, the release of imported articles shall not be allowed unless and until a decision of the Collector has been confirmed in writing by the Commissioner of Customs. (Emphasis ours.) There is nothing in Section 2313 of the Tariff and Customs Code to support the position of El Greco. As the CTA en banc explained, in case the BOC Commissioner fails to decide on the automatic appeal of the Collectors Decision within 30 days from receipt of the records thereof, the case shall again be deemed automatically appealed to the Secretary of Finance. Also working against El Greco is the fact that jurisdiction over M/V Neptune Breeze, otherwise known as M/V Criston, was first acquired by the Legaspi District Collector; thus, the Manila District Collector cannot validly acquire jurisdiction over the same vessel. Judgment rendered without jurisdiction is null and void, and void judgment cannot be the source of any right whatsoever.28 Finally, we strongly condemn the ploy used by M/V Neptune Breeze, assuming a different identity to smuggle goods into the country in a brazen attempt to defraud the government and the Filipino public and deprive them of much needed monetary resources. We further laud the efforts of the Commissioner of the Customs Bureau and the other executive officials in his department to curb the proliferation of smuggling syndicates in the country which deserves no less than our full support. WHEREFORE, in view of the foregoing, the instant Petition is DENIED. The Decision dated 17 October 2005 and Resolution dated 7 February 2006 of the Court of Tax Appeals En Banc in CTA EB No. 172 are AFFIRMED.Costs against the petitioner. SO ORDERED. MINITA V. CHICO-NAZARIO Associate Justice

WE CONCUR: CONSUELO YNARES-SANTIAGO Associate Justice Chairperson MA. ALICIA AUSTRIA-MARTINEZ Associate Justice ANTONIO EDUARDO B. NACHURA Associate Justice

RUBEN T. REYES

Associate Justice

ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. CONSUELO YNARES-SANTIAGO Associate Justice Chairperson

CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO

G.R. No. 128064

March 4, 2004

R.V. MARZAN FREIGHT, INC., petitioner, vs. COURT OF APPEALS and SHIELAS MANUFACTURING, INC., respondents. DECISION CALLEJO, SR., J.: This is a petition for review under Rule 45 of the 1997 Rules of Civil Procedure of the Decision1 of the Court of Appeals in CA-G.R. CV No. 49905 affirming with modification the Decision2 of the Regional Trial Court of Rizal, Pasig, Branch 154, in Civil Case No. 61644. THE FACTS

The petitioner RV Marzan Freight, Inc., owned and operated a customs-bonded warehouse located at the Bachrach Corporation Building, where it accepted all forms of goods and merchandise for storage and safekeeping. Private respondent Shielas Manufacturing, Inc., on the other hand, was a corporation organized and existing under Philippines laws, and engaged in the garment business. Philippine Fire and Marine Insurance Corporation (Philfire) issued Insurance Policy No. F-8952/4358-HO dated December 11, 19893 in favor of the petitioner, covering its warehouse as well as "stocks in trade of every kind and description usual to the warehouse operation of the Assured and/or other interest that may appear during the currency of this policy whilst contained in the building, known as BACHRACH CORP." On April 12, 1989, raw materials consigned to the private respondent covered by Invoice No. TG-891254arrived in the Philippines from Keelung, Taiwan on board the vessel SS World Lion V-302W owned by Sea-Land Service, Inc. from its supplier, Tricon Enterprises Ltd. The materials were valued at US$32,006.93.5 The Bureau of Customs treated the raw materials as subject to ordinary import taxes and were not immediately released to the private respondent. Moreover, the consignee failed to file the requisite import entry6 and failed to claim the cargo.7 In a Letter8 to the Office of the District Collector of the Bureau of Customs dated July 24, 1989, Sea-Land Service Inc. authorized the petitioner to take delivery of Container No. SEAU-462597 consigned to the private respondent for stripping and safekeeping. In a Letter9 addressed to Bureau of Customs District Collector Emma M. Rosqueta dated September 11, 1989, the International Container Terminal Services, Inc. (ICTSI) requested for authority "to clear the storage areas of cargoes which have been abandoned by their owners or seized by the Bureau of Customs." Included in the request was the cargo of the private respondent. The District Collector of Customs initiated Abandonment Proceedings No. 288-89 over the cargo. On September 29, 1989, the District Collector issued a Notice10 to the consignee of various overstaying cargo, including that of the private respondent, giving them fifteen (15) days from notice thereof to file entry of the cargoes without prejudice to the right of the consignees to redeem articles pursuant to Section 1801 of the Tariff and Customs Code within the prescribed period therein; otherwise, the cargoes would be deemed abandoned and sold at public auction. As ordered, the Notice of the Abandonment Proceedings was posted on the Bureaus bulletin board on September 29, 1980.11 No separate

notice was sent to the private respondent because per the ICTSIs records, the address of the consignee was unknown. Earlier, on November 7, 1989, Leonardo S. Doctor, Chief of the Law Division of the Bureau of Customs, issued a Memorandum12 informing the Chief for Auction and Cargo Disposal Division that the declaration of abandonment in the aforestated proceedings had already become final and executory as of October 30, 1989 and that the cargoes subject matter thereof should be inventoried and sold at public auction. However, before the inventory and sale at public auction of the goods could be accomplished, part of the warehouse containing the shipment was burned on July 26, 1990. The private respondents shipment was, likewise, burned and destroyed. The Philfire paid to the private respondent the amount of P12,000,000, for which the latter was issued a receipt. On March 19, 1991, the private respondent, through counsel, sent a letter to the petitioner demanding payment of the value of the goods in the amount of US$32,006.93. However, the petitioner rejected the demands. Meanwhile, on October 28, 1991, the petitioner executed a "Release of Claim and Hold Harmless Undertaking."13 On December 26, 1991, or after the lapse of more than two years from the arrival of the cargo in the Philippines, the private respondent filed a complaint for damages before the RTC of Pasig City, Branch 154, against the petitioner. The private respondent alleged, inter alia, that its goods were stored in the petitioners bonded warehouse due to the problem it encountered at the Bureau of Customs; that the goods were gutted by fire on July 26, 1990 while stored in said bonded warehouse; and, despite demands for the release of the goods, the petitioner refused to release the same. The private respondent prayed that the petitioner and Philfire be held jointly and severally liable to pay the following: a) the sum of US$32,006.93 or its peso equivalent computed based on the rate of exchange prevailing at the time of payment with interest thereon from the time of the filing of complaint up to the time of actual payment; b) the sum of P30,000.00 as and for attorneys fees; c) the costs of suit;14 In its answer, the petitioner interposed special and affirmative defenses. Aside from alleging that there was no privity of contract between it and the private respondent, the petitioner also alleged that the private respondent lost the right of

action against it as it was not the real party-in-interest in the case. The petitioner averred that the goods in question were received not from the private respondent but from the Bureau of Customs, under Customs Administrative Order No. 10288 dated August 30, 1988, covering Forfeited Cargoes (FC), Abandoned Cargoes (AC) and Cargoes held under Warrant/Seizure and Detention (CWSD). According to the petitioner, before the subject cargo was destroyed by accidental fire, the private respondent had violated the Tariff and Customs Code and related laws, rules and regulations, and failed to pay the corresponding taxes, duties and penalties for the importation. Furthermore, the private respondent failed to make the corresponding claim for the release of the said cargo, until the same was declared as "overstaying cargo," and later as "abandoned cargo." The petitioner further asserted that the government, and not the private respondent, was the owner thereof. As such, the private respondent was not entitled to the insurance proceeds arising out of the fire policy covering the petitioner as a customs bonded warehouse. Furthermore, considering that the cause of the loss of the subject cargo was a fortuitous event, an "act of God," and the petitioner, having exercised the required due care under the circumstances, cannot be held legally liable for such loss. Finally, the petitioner alleged that its warehouse is legally considered as an "extension of the Bureau of Customs" and all goods transferred therein continue to be in the custody of the Bureau of Customs, with all its legal implications.15 Defendant Philfire, for its part, filed a motion to dismiss16 on the ground that it had no contractual obligation to the private respondent; hence, the latter had no cause of action against it. The trial court deferred the resolution of the said motion17 until the grounds appeared to be indubitable. In its answer,18 Philfire alleged that there was no privity of contract between it and the private respondent, considering that the petitioner was the insured party. Furthermore, the private respondent had no insurable interest in the goods that were burned in the petitioners warehouse. Finally, Philfire alleged that the obligation sought to be enforced by the private respondent had already been settled when it paid its obligation under the insurance policy19 as shown in the "Release of Claim and Hold Harmless Undertaking" dated October 28, 1991, executed and signed for and in behalf of the petitioner by its Vice- President, Mr. Cesar D. Catalan. The private respondent filed its pre-trial brief proposing that the following issues to be litigated by the parties and resolved by the Court: 1. Corporate personality of the plaintiff; 2. Value of plaintiffs goods stored in R.V. Marzans warehouse and which were destroyed by fire;

3. Whether or not at the time of the fire on July 26, 1990. plaintiffs goods were already "abandoned goods" so that the plaintiff, at the time of the fire, was no longer the owner of the said goods. 4. Attorneys fees and damages;20 However, the trial court did not issue a pre-trial order. During the trial, the petitioner presented Atty. Leonardo S. Doctor, the Law Division Chief of the Bureau of Customs, as one of its witnesses to prove that the cargo had already been declared by the District Collector of Customs as "abandoned cargo" in Abandonment Proceedings No. 288-89, and that the cargo was destroyed by fire before it could be sold at public auction. Thereafter, the private respondent filed its memorandum stating, inter alia, that it did not abandon the goods because it did not receive the notice of abandonment of the cargo from the Bureau of Customs. The petitioner insisted that upon the abandonment of the cargo under Section 1802 of the Tariff and Customs Code of the Philippines (TCCP), it became, ipso facto, the property of the government; hence, the private respondent had no right to claim the value of the shipment. After trial, the court rendered judgment, the decretal portion of which reads: WHEREFORE, foregoing premises considered, defendant RV Marzan is held solely liable for the loss suffered by the plaintiff and is hereby ordered to pay the plaintiff the following: 1. The sum of US$32,006.93 or its peso equivalent computed on the rate of exchange prevailing at the time of payment with 6% interest thereon from the time of filing of complaint up to the time of actual payment; 2. The sum of P30,000.00 as and for attorneys fees; and 3. Costs of suit. The complaint against Philfire, the counterclaim against Shielas and the crossclaim against R.V. Marzan, are hereby dismissed.21 According to the trial court, the Bureau of Customs subsequent declaration that the subject shipment was "abandoned cargo" was ineffective, as the private respondent was not sent a copy of the September 29, 1989 Notice as required by Sec. 1801 of the Tariff and Customs Code. Under the law, notice of the proceedings of abandonment should be given to the private respondent as the consignee or its agent, to enable it to adduce evidence at a public hearing,

conformably to the requirement of due process. Since the private respondent was never notified of the abandonment proceedings, it cannot, thus, be said that it impliedly abandoned the shipment and lost its ownership over the same in favor of the government. The trial court rejected the petitioners claim that it could not be held liable for the private respondents loss because the fire that destroyed the subject cargo was an "act of God." According to the trial court, this is precisely one of the reasons why a bonded warehouse is required by law to insure the goods received and stored against fire; otherwise, persons dealing with a bonded warehouse would not be afforded due protection. According to the court, the policy procured by the petitioner inures equally and proportionately to the benefit of all the owners of the property insured, even if the owner of the goods did not request or know of the insurance. Citing Section 1902 of the Tariff and Customs Code, the trial court pointed out that the petitioners bonded warehouse is considered as an extension of the Bureau of Customs only insofar as it continues with the storage and safekeeping of goods transferred to it by the latter. Finally, the trial court ruled that the private respondent had no cause of action against the insurer Philfire, as it was not a party to the insurance contract between the petitioner and Philfire. Since the terms of the insurance contract do not confer a benefit upon a third person as required by Article 1311 of the Civil Code, the private respondent had no right to the insurance proceeds. The petitioner appealed the decision to the Court of Appeals, docketed as CAG.R. CV No. 49905, and assigned the following errors: I THE TRIAL COURT ERRED IN NOT DISMISSING THE COMPLAINT FOR LACK OF A VALID CAUSE OF ACTION AND IN HOLDING THE DEFENDANT MARZAN LIABLE FOR THE LOSS SUFFERED BY PLAINTIFF IN SPITE OF THE FACT THAT, LONG BEFORE THE FIRE OF JULY 26, 1990, WHICH GUTTED DEFENDANTS WAREHOUSE, THE PLAINTIFFS SHIPMENT HAS ALREADY BEEN DECLARED ABANDONED BY FINAL ORDER OF THE BUREAU OF CUSTOMS. II THE TRIAL COURT ERRED IN AWARDING ATTORNEYS FEE[S] OF P30,000.00.22 The petitioner asserted that the private respondent renounced its interests over the cargo by its continued failure and refusal, despite notice to it, to claim the cargo and pay the corresponding duties and taxes. It disclaimed liability on the following grounds:

1. That contrary to the plaintiffs submission, it was not exempt from the payment of customs duties and taxes and hence, required to file entry within five (5) days from arrival of the shipment as provided for under 1801 of the Tariff and Customs Code; 2. The subject shipment was declared abandoned by the Bureau of Customs due to the failure of the plaintiff-consignee to claim the same within the 15-day reglementary period from the date of posting of the notice to claim as provided in Section 1801(b) of Republic Act No. 7651; and, 3. The abandonment of the cargo was already declared final as of October 30, 1989 in the abandonment proceedings conducted by the Bureau of Customs, and, hence the plaintiffs shipment ipso factobecame the property of the government pursuant to Section 1802 of the same Act. 4. It was only on January 6, 1992, that plaintiff filed the present complaint against the defendant or more than two years after the declaration of abandonment of subject shipment became final and executory.23 Anent the award of attorneys fees in favor of the private respondent, the petitioner averred that, as there was no finding of malice or bad faith in its refusal to pay the private respondent, there was no factual basis for the award. In its brief, the private respondent contended that, as found by the trial court, there was no valid and effective abandonment over the subject goods. It was also pointed out that if the petitioners claim that the subject goods belonging to the private respondent had been declared abandoned cargo and the same had become government property, then the government, through the Bureau of Customs, should have intervened in the case, considering the private respondents vigorous stance in denying it had ever abandoned its goods. Despite the fact that the Bureau of Customs was clearly apprised of the case when the petitioner presented Atty. Doctor as its witness, there was no such attempt from the government to intervene and claim ownership over the cargo. The private respondent also pointed out that the petitioners refusal to satisfy a valid, just and demandable claim had compelled it to litigate and incur expenses to protect its interest. The petitioners refusal to satisfy the private respondents claim was in furtherance of an intention to unjustly enrich itself, and was evidence of the latters gross and evident bad faith. The Court of Appeals upheld the trial courts ruling in its Decision dated January 31, 1997. The appellate court held that the District Collector of Customs failed to give due notice of the abandonment proceedings to the private respondent, and

that the same constituted denial of due process of law. Although notice of the declaration of abandonment was posted on the Bureau of Customs bulletin board, the same was insufficient; such notice would be proper only in cases where the owner or importer is unknown, pursuant to Section 2304 of the Tariff and Customs Code. The appellate court averred that the private respondent is duly registered with the Garment and Textile Export Board and with the Bureau of Customs as Garments Manufacturer and Exporter; as such, the Bureau of Customs knew or should have known the address of the private respondent and should have sent the required notice to it at said address. For the Collector of Customs failure to duly notify the private respondent, the goods in question cannot be considered as impliedly abandoned cargo. The decretal portion of the decision of the Court of Appeals reads, thus: WHEREFORE, the appealed decision in Civil Case No. 61644 is hereby AFFIRMED by this Court, with costs against defendant-appellant.24 The petitioner assails the decision of the Court of Appeals contending that: I The Court of Appeals erred in failing to consider the fact that the Regional Trial Court did not have jurisdiction over the central issue of the case. II The Court of Appeals erred in not dismissing the Respondents Complaint outright for lack of cause of action.25 The petitioner asserts that the private respondent had a cause of action against it for the value of the shipment only if the latter was still the owner of the shipment when it was gutted by fire on July 26, 1990. The ultimate issues were as follows: whether the private respondent had impliedly abandoned the cargo and whether the declaration of abandonment made by the Chief of the Law Division of the Bureau of Customs in the abandonment proceedings had become final and executory. However, according to the petitioner, the resolution of such issues is within the exclusive jurisdiction of the District Collector of Customs, and within the appellate jurisdiction of the Court of Tax Appeals. Thus, the RTC had no jurisdiction to delve into and resolve the issue of whether or not the private respondent was duly served with a copy of the notice of the abandonment proceedings and to pass upon the validity of the abandonment proceedings itself. The petitioner asserts that the Bureau of Customs has exclusive and original jurisdiction to hear and decide cases concerning the implementation of Customs

Laws or any other law that the Bureau is charged to implement. Even if there was a violation of due process in the seizure and forfeiture case, the Bureau retained jurisdiction over the same, to the exclusion of the regular courts. According to the petitioner, it behooved the RTC to dismiss the complaint of the private respondent for lack of jurisdiction, without prejudice to the latters right to appeal the notice of abandonment to the Commissioner of Customs, and, from an adverse ruling of the Commissioner of Customs, to the Court of Tax Appeals. In its Comment, the private respondent avers that the petitioner raised for the first time only in this Court the issue of the trial courts jurisdiction, as well as the matter of its failure to appeal from the declaration of abandonment of the District Collector of Customs with the Commissioner of Customs. The private respondent never raised the issue in its pleading in the RTC and in the CA. Thus, the petitioner is barred by laches from raising such issue in this case. The private respondent asserts that the petitioners motive is clearly to assail the factual findings of the trial court as affirmed by the CA and introduce new matters in the case. According to the private respondent, this runs counter to established jurisprudence that the Supreme Court is not a trier of facts. The private respondent also asserts that the RTC did not pass upon the validity or invalidity of the administrative proceedings before the Collector of Customs, but merely applied the law, particularly the last sentence of Sec. 1801 of the Tariff and Customs Code. Contrary to the private respondents contention, the trial court had jurisdiction over its action. As admitted by the petitioners witness, Atty. Leonardo Doctor, the private respondent was not furnished a notice giving it fifteen days to file the appropriate import entry documents. Hence, the private respondent was not deemed to have abandoned the cargo. The private respondent also posits that considering that actions of the Collector of Customs are reviewable to the Court of Tax Appeals, which are, in turn, ultimately reviewable by the Court of Appeals, the latter court, to which the petitioners appeal had eventually found its way, would therefore be fully competent to pass upon the validity of the abandonment proceedings. Furthermore, according to the private respondent, an appeal of the abandonment proceedings before the District Collector of Customs would be a futile exercise as the goods had already been burned and destroyed. The private respondent further posits that if, indeed, the goods had been abandoned by the private respondent and became the property of the government, as averred by the petitioner, the Bureau of Customs should have intervened in the case, pursuant to Sec. 1, Rule 19 of the 1997 Rules of Civil Procedure. The fact that the government did not intervene gives rise to doubts as to the petitioners claim that the subject goods had been declared abandoned by the Bureau of Customs and, thus, became the property of the government. Finally, the private respondent argued, the Bureau of

Customs lost jurisdiction over the cargo when it was gutted by fire before the sale at public auction. In its reply, the petitioner insists that the defense of lack of jurisdiction may be interposed at any time, during appeal or even after final judgment, conformably to the previous rulings of the Court. THE ISSUE The core issue raised by the petitioner for resolution in this case is whether or not the trial court had jurisdiction to review and declare ineffective the declaration of the District Collector of Customs in Abandonment Proceedings No. 288-89 that the subject shipment was abandoned cargo and that, thenceforth, the government ipso facto became the owner thereof. We uphold the contention of the petitioner. Irrefragably, the RTC had jurisdiction over the nature of the private respondents action, which was one for the collection of the value of the cargo gutted by fire, while under the custody and control of the petitioner preparatory to its sale at public auction by the Bureau of Customs. The jurisdiction of the court or other tribunal is determined by the relevant allegations of the complaint and the character of the relief sought, irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims accorded therein. The jurisdiction of the trial court does not depend upon the defenses in the answer or in a motion to dismiss.26 However, the jurisdiction of the court or tribunal over the issues, as gleaned from the pleadings of the parties, is determined by the law which is determinative and decisive of said issue. As gleaned from the pleadings of the parties in the trial court, the core issue therein was whether or not the private respondent was the owner of the cargo when it was gutted by fire, as claimed by the private respondent, or owned by the government after it was declared by the District Collector of Customs as abandoned cargo, as claimed by the petitioner. Indeed, the private respondent, in its pre-trial brief, listed this as one of the issues to be resolved by the Court, thus: 1. Whether or not at the time of the fire on July 26, 1990. plaintiffs goods were already "abandoned goods" so that the plaintiff, at the time of the fire, was no longer the owner of said goods."27 If the government owned the cargo before it was gutted by fire, then the private respondent had no cause of action against the petitioner. But the resolution of

the issue is riveted to and intertwined with the resolution of the issue of whether the RTC is vested with jurisdiction to review and nullify a declaration made by the District Collector of Customs that the shipment was abandoned cargo and, thus, ipso facto belonged to the government. The resolution of both issues involved the application of Section 1801 and Section 1802 of the Tariff and Customs Code, which read: SEC. 1801. Abandonment, Kinds and Effects of. Abandonment is expressed when it is made direct to the Collector by the interested party in writing, and is implied when, from the action or omission of the interested party to file the import entry within five (5) days or an extension thereof from the discharge of the vessel or aircraft, or having filed such entry, the interested party fails to claim his importation within five (5) days thereafter or within an extension of not more than five (5) days shall be deemed an implied abandonment. An implied abandonment shall not be effective until the article shall be declared by the Collector to have been abandoned after notice thereof is given to the interested party as in seizure cases. Any person who abandons an article or who fails to claim his importation as provided for in the preceding paragraph shall be deemed to have renounced all his interests and property rights therein. SEC. 1802. Abandonment of Imported Articles.- The owner or importer of any articles may, within ten days after filing of the import entry, abandon to the Government all or a part of the articles included in an invoice, and, thereupon, he shall be relieved from the payment of duties, taxes and all other charges and expenses due thereon: Provided, That the portion so abandoned is not less than ten per cent of the total invoice and is not less than one package, except in cases of articles imported for personal or family use. The articles so abandoned shall be delivered by the owner or importer at such place within the port of arrival as the Collector shall designate, and upon his failure to so comply, the owner or importer shall be liable for all expenses that may be incurred in connection with the disposition of the articles. Nothing in this section shall be construed as relieving such owner or importer from any criminal liability which may arise from any violation of law committed in connection with the importation of the abandoned article. The resolution of the issue also calls for the application of Section 2601 of the said Code which provides that the property in customs custody, including abandoned articles, shall be subject to sale under the conditions provided

therein. Indeed, the trial court resolved the issues under Section 1801 of the Tariff and Customs Code and found the petitioner liable to the private respondent, under Section 190228 of the said Code. The trial court held ineffective the declaration made by the District Collector of Customs that the cargo was abandoned because the notice to the consignee as mandated by Section 1801 of the Code was not complied with. Thus, according to the trial court, the private respondent owned the cargo and had a cause of action against the petitioner: In trying to avoid liability, RV Marzan admits that the plaintiff was the consignee of the cargo upon its arrival in the Philippines. However, RV Marzan avers that at the time of the fire, the goods were already the property of the government. Before the fire, RV Marzan received the cargo from the Bureau of Customs pursuant to a Memorandum Order declaring it as "abandoned cargo." This Memorandum Order which is in accordance with Sec. 1801 of the Tariff and Customs Code, provides as follows: An examination of the records reveal that the subject shipment was subsequently declared abandoned by the Bureau of Customs as "abandoned cargo" for the plaintiffs failure to file the import entry. This declaration is found by the Court to be ineffective. Under the law, notice of the proceedings of abandonment was not given to the consignee or the plaintiff herein or his agent. The consignee in this case being known, should have been notified of the abandonment of his property in favor of the government and that he should have been given a chance at a public hearing to present evidence and to be heard with respect to the cargo subject of abandonment. This is part of due process.29 Evidently, the resolution of the foregoing issues is within the exclusive competence of the District Collector of Customs, the Commissioner of Customs and within the appellate jurisdiction of the Court of Tax Appeals. Indeed, in Alemars, Inc. v. Court of Appeals,30 we held that: Petitioner primarily seeks the annulment of the act of the Collector of Customs declaring the subject importation abandoned and ordering it sold at public auction, claiming that the abandonment proceeding held by the Collector of Customs was irregular since the latter did not give notice to petitioner of the abandonment before declaring the importation abandoned.

Consequently, the case falls within the jurisdiction of the Commissioner of Customs and the Court of Tax Appeals vis--vis the averments in the amended petition, not with the regional trial court. In Jao v. Court of Appeals,31 we held that the RTC is devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs, and to enjoin or otherwise interfere with the said proceedings even if the seizure was illegal. Such act does not deprive the Bureau of Customs of jurisdiction thereon. Thus, we held: There is no question that Regional Trial Courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with these proceedings. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. The Regional Trial Courts are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus. It is likewise well-settled that the provisions of the Tariff and Customs Code and that of Republic Act No. 1125, as amended, otherwise known as "An Act Creating the Court of Tax Appeals," specify the proper fora and procedure for the ventilation of any legal objections or issues raised concerning these proceedings. Thus, actions of the Collector of Customs are appealable to the Commissioner of Customs, whose decision, in turn, is subject to the exclusive appellate jurisdiction of the Court of Tax Appeals and from there to the Court of Appeals. The rule that Regional Trial Courts have no review powers over such proceedings is anchored upon the policy of placing no unnecessary hindrance on the governments drive, not only to prevent smuggling and other frauds upon Customs, but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform. Even if the seizure by the Collector of Customs were illegal, which has yet to be proven, we have said that such act does not deprive the Bureau of Customs of jurisdiction thereon. "Respondents assert that respondent Judge could entertain the replevin suit as the seizure is illegal, allegedly because the warrant issued is invalid and the seizing officer likewise was devoid of authority. This is to lose sight of the distinction between the existence of the power and the regularity of the proceeding taken under it. The governmental agency concerned, the Bureau of

Customs, is vested with exclusive authority. Even if it be assumed that in the exercise of such exclusive competence a taint of illegality may be correctly imputed, the most that can be said is that under certain circumstances the grave abuse of discretion conferred may oust it of such jurisdiction. It does not mean, however, that correspondingly a court of first instance is vested with competence when clearly in the light of the decisions the law has not seen fit to do so." The allegations of petitioners regarding the propriety of the seizure should properly be ventilated before the Collector of Customs. We have had occasion to declare: "The Collector of Customs when sitting in forfeiture proceedings constitutes a tribunal expressly vested by law with jurisdiction to hear and determine the subject matter of such proceedings without any interference from the Court of First Instance (Auyong Hian v. Court of Tax Appeals, et al., 19 SCRA 10). The Collector of Customs of Sual-Dagupan in Seizure Identification No. 14-F-72 constituted itself as a tribunal to hear and determine among other things, the question of whether or not the M/V Lucky Star I was seized within the territorial waters of the Philippines. If the private respondents believe that the seizure was made outside the territorial jurisdiction of the Philippines, it should raise the same as a defense before the Collector of Customs and if not satisfied, follow the correct appellate procedures. A separate action before the Court of First Instance is not the remedy." The trial court was incompetent to pass upon and nullify (1) the seizure of the cargo in the abandonment proceedings, and (2) the declaration made by the District Collector of Customs that the cargo was abandoned and ipso facto owned by the government. It, likewise, had no jurisdiction to resolve the issue of whether or not the private respondent was the owner of the cargo before it was gutted by fire. The trial court should have rendered judgment dismissing the complaint, without prejudice to the right of the private respondent to ventilate the issue before the Commissioner of Customs and/or to the Court of Tax Appeals as provided for in the Tariff and Customs Code. The District Collector of Customs did not lose jurisdiction over the abandonment proceedings. The loss of the cargo did not extinguish his incipient jurisdiction in the said proceedings, nor render functus officio her declaration that the subject shipment had been abandoned. The private respondent cannot argue that if its complaint against the petitioner is dismissed, the latter would be enriching itself at the expense of the private respondent. In point of fact, the petitioner is liable to the government for the

duties and taxes due for the imported cargo under Section 1902 of the Tariff and Customs Code, which reads: SEC. 1902. Responsibility of Operators. The operators of bonded warehouse in case of loss of the imported articles stored shall be liable for the payment of duties and taxes due thereon. The government assumes no legal responsibility in (sic) respect to the safekeeping of articles stored in any customs warehouses, sheds, yards or premises. Neither may the private respondent invoke estoppel, because the parties, in their pleadings in the trial court and in the Court of Appeals, raised the same issues for resolution. It must be stressed that the cargo arrived in the Philippines on April 12, 1989. The private respondent failed to accomplish the required import entry declarations, pay the requisite taxes and duties, if any, and take delivery of the cargo. It was only after the lapse of more than two years, or on December 21, 1991, that the private respondent filed its complaint against the petitioner in the RTC. By then, the cargo had been gutted by fire. The private respondent has not made any valid justification for its silence thereon and its inaction. In can be said then that the private respondent went to court with unclean hands. The refusal of the Bureau of Customs to intervene in the trial court does not, in any way, fortify the private respondents claim that it is the owner of the cargo. The government had no legal obligation to intervene in the trial court considering that the latter had no jurisdiction over the complaint. It was enough that then Bureau of Customs Law Division Chief Atty. Doctor testified that the cargo was duly declared by the District Collector of Customs as abandoned property, that the said declaration had become final, and that the government became ipso facto the owner of the cargo. The government had every right to expect that the trial court would dismiss the complaint for lack of jurisdiction over the issue raised therein. IN THE LIGHT OF THE FOREGOING, the petition is GRANTED. The Decisions of the RTC and of the Court of Appeals are SET ASIDE and REVERSED. The RTC is ORDERED to dismiss the complaint of the private respondent against the petitioner, as well as the counterclaim of the latter against the private respondent. SO ORDERED.

Quisumbing, (Acting Chairman), Austria-Martinez, and Tinga, JJ., concur. Puno, (Chairman), J., on leave.

G.R. Nos. 166309-10

March 9, 2007

REPUBLIC OF THE PHILIPPINES, represented by the COMMISSIONER OF CUSTOMS, Petitioner, vs. UNIMEX MICRO-ELECTRONICS GmBH, Respondent. DECISION CORONA, J.: This is an appeal by certiorari under Rule 45 of the Rules of Court seeking to nullify and set aside the decision of the Court of Appeals (CA) dated August 30, 20041 and its amended decision of November 30, 20042 in CA-G.R. SP No. 75359 and CA-G.R. SP No. 75366. The antecedent facts follow. Sometime in April 1985, respondent Unimex Micro-Electronics GmBH (Unimex) shipped a 40-foot container and 171 cartons of Atari game computer cartridges, duplicators, expanders, remote controllers, parts and accessories to Handyware Phils., Inc. (Handyware). Don Tim Shipping Corporation transported the goods with Evergreen Marine Corporation as shipping agent. After the shipment arrived in the Port of Manila on July 9, 1985, the Bureau of Customs (BOC) agents discovered that it did not tally with the description appearing on the cargo manifest. As a result, BOC instituted seizure proceedings against Handyware and later issued a warrant of seizure and detention against the shipment. On June 5, 1987, the Collector of Customs issued a default order against Handyware for failing to appear in the seizure proceedings. After an ex parte hearing, the Collector of Customs forfeited the goods in favor of the government. Subsequently, on June 15, 1987, respondent Unimex (as shipper and owner of the goods) filed a motion to intervene in the seizure proceedings. The Collector of Customs granted the motion but later on declared the June 5, 1987 default order against Handyware as final and executory, thus affirming the goods forfeiture in favor of the government.

Respondent filed a petition for review against petitioner Commissioner of Customs (BOC Commissioner) in the Court of Tax Appeals (CTA). This case was docketed as CTA Case No. 4317.3 In a decision4 dated June 15, 1992, the CTA reversed the forfeiture decree and ordered the release of the subject shipment to respondent subject to the payment of customs duties. The CTA decision became final and executory on July 20, 1992. The decision read: WHEREFORE, the decree of forfeiture of [petitioner] Commissioner of Customs is hereby reversed and the subject shipment is hereby ordered released to [respondent] subject to the condition that the correct duties, taxes, fees and other charges thereon be paid to the Bureau of Customs based on the actual quality and condition of the shipments at the time of the filing of the corresponding import entry in compliance with this decision and further subject to the presentation of Central Bank Release Certificate.5 Unfortunately, however, respondents counsel failed to secure a writ of execution to enforce the CTA decision. Instead, it filed separate claims for damages against Don Tim Shipping Corporation and Evergreen Marine Corporation6 but both cases were dismissed. On September 5, 2001, respondent filed in the CTA a petition for the revival of its June 15, 1992 decision. It prayed for the immediate release by BOC of its shipment or, in the alternative, payment of the shipments value plus damages. The BOC Commissioner failed to file his answer, hence, he was declared in default. During the ex parte presentation of respondents evidence, BOC informed the court that the subject shipment could no longer be found at its warehouses. In its decision of September 19, 2002,7 the CTA declared that its June 15, 1992 decision could no longer be executed due to the loss of respondents shipment so it orde red the BOC Commissioner to pay respondent the commercial value of the goods based on the prevailing exchange rate at the time of their importation. The dispositive portion of the decision read: WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED. Accordingly, [petitioner] is ORDERED to PAY [respondent] the amount of P8,675,200.22 representing the commercial value of the shipment at the time of importation subject, however, to the payment of the proper taxes, duties, fees and other charges thereon. The payment shall be taken from the sale or sales of the goods or properties seized or forfeited by the Bureau of Customs.8 The BOC Commissioner and respondent filed their respective motions for reconsideration (MRs) of the above decision. In his MR, the BOC Commissioner argued that the CTA altered its June 15, 1992 decision by converting it from an action for specific performance into a money judgment.9 On the other hand, respondent contended that the exchange rate prevailing at the time of actual payment should apply. It also argued that the CTA erred in not imposing legal interest on BOCs obligation.

The CTA denied both MRs. The BOC Commissioner and the respondent then filed separate petitions in the CA. The BOC Commissioners appeal was docketed as CA-G.R. SP No. 75359 and respondents as CA-G.R. SP No. 75366. The CA consolidated the two cases. On August 30, 2004, the CA dismissed the BOC Commissioners appeal and granted respondents. In CA-G.R. SP No. 75359, the CA held that the BOC Commissioner was liable for the value of the subject shipment as the same was lost while in its custody. On the other hand, in CAG.R. SP No. 75366, it ruled that the CTA erred in using as basis the prevailing peso-dollar exchange rate at the time of the importation instead of the prevailing rate at the time of actual payment pursuant to RA 4100.10 It added that respondent was also entitled to legal interest. According to the CA: Considering that the BOC was grossly negligent in handling the subject shipment, this Court finds Unimex entitled to legal interests. Accordingly, the actual damages thus awarded shall be subject to 6% interest per annum. Be that as it may, such interest shall accrue only from the date of the CTA Decision on 19 September 2002 since it is from that the quantification of Unimexs damages have been reasonably ascertained xxx xxx xxx Finally, Unimex is likewise entitled to 12% interest per annum in lieu of 6% per annum from the time this Decision becomes final and executory until fully paid, in as much as the interim period is equivalent to a forbearance of credit. xxx xxx xxx WHEREFORE, the appealed Decision, dated 19 September 2002, is hereby AFFIRMED WITH MODIFICATION in that the Bureau of Customs is adjudged liable to Unimex for the value of the subject shipment in the amount of $466,885.54. The Bureau of Customs liability may be paid in Philippine currency, computed at the exchange rate prevailing at the time of actual payment with legal interest thereon at the rate of 6% per annum from 19 September 2002 up to its finality. Upon finality of this Decision, the rate of legal interest shall be 12% per annum until the value of the subject shipment is fully paid. 11 The BOC Commissioner and respondent again filed their respective MRs of the above decision. The Commissioner insisted that the BOC was not liable to respondent. On the other hand, respondents MR sought payment of the goods value in euros, not in US dollars.12 It also demanded that the 6% legal interest be reckoned from the date of its judicial demand on June 15, 1987. On November 30, 2004, the CA denied the BOC Commissioners MR and granted respondents. Accordingly, the decretal portion of its amended decision read:

WHEREFORE, the appealed Decision, dated 19 September 2002, is hereby AFFIRMED WITH MODIFICATION in that the Bureau of Customs is adjudged liable to Unimex for the value of the subject shipment in the amount of Euro 669,982.565. The Bureau of Customs liability [may be] paid in the Philippine currency, computed at the exchange rate prevailing at the time of actual payment with legal interests thereon at the rate of 6% per annum from 15 June 1987 up to the finality of this Decision. In lieu of the 6% interest, the rate of legal interest shall be 12% per annum upon finality of this Decision until the value of the subject shipment is fully paid.13 The Republic of the Philippines, represented by the BOC Commissioner, now comes to us via this petition assailing the CTA decision on the following grounds: (1) the June 15, 1992 CTA judgment could not be altered after it became final and executory; (2) laches has already set in, hence, respondents case (reviving the June 15, 1992 CTA judgment) should have been dismissed outright; (3) the legal interest imposed was erroneous and (4) the government funds cannot be charged with respondents claim without a corresponding appropriation. Modification of a Final And Executory Judgment In support of its first argument, petitioner contends that once a judgment becomes final and executory, it becomes immutable and unalterable, thus the CTA erred in changing the tenor of its June 15, 1992 decision by ordering it to instead pay the value of the goods. 14 We disagree. Indeed, the general rule is that once a decision becomes final and executory, it cannot be altered or modified. However, this rule is not absolute. In some cases,15 we held that where facts or events transpire after a decision has become executory, which facts constitute a supervening cause rendering the final judgment unenforceable, said judgment may be modified. Also, a final judgment may be altered when its execution becomes impossible or unjust. In the case at bar, parties do not dispute the fact that after the June 15, 1992 CTA decision became final and executory, respondents goods were inexplicably lost while under the BOCs custody. Certainly, this fact presented a supervening event warranting the modification of the CTA decision. Even if the CTA had maintained its original decision, still petitioner would have been unable to comply with it for the obvious reason that there was nothing more to deliver to respondent. Laches Did Not Set in to Frustrate Respondents Petition to Revive The June 15, 1992 CTA Decision Regarding petitioners second argument, we hold that it cannot impugn respondents claim on the basis of laches. Laches is the failure or negligence to assert a right within a reasonable time, giving rise to a presumption that a party has abandoned it or declined to assert it.16 It is not a mere question of lapse or passage of time but is principally a question of the inequity or unfairness of permitting a right or claim to be asserted. 17

It is clear from the records that respondent was not guilty of negligence or omission. Neither did it abandon its claim against petitioner. We agree with the CTA (as later affirmed by the CA) that: There was never negligence or omission to assert its right within a reasonable period of time on the part of [respondent]. In fact, from the moment it intervened in the proceedings before the Bureau of Customs up to the present time, [respondent] is diligently trying to fight for what it believes is right. [Respondent] may have failed to secure a writ of execution with this court when the [CTA decision] became final and executory due to wrong legal advice, yet it does not mean that it was sleeping on its right for it filed a case against the shipping agent and/or the sub-agent. Therefore, there [was never] an occasion wherein petitioner had abandoned or declined to assert its right. 18 The rule is that the findings of fact by the lower court,19 if affirmed by the CA, are conclusive on us.20 Absent any reason that compels us to deviate from the rule, as in this case, we shall not disturb such findings. Moreover, the doctrine of laches is based upon grounds of public policy and equity. It is invoked to discourage stale claims but is entirely addressed to the sound discretion of the court.21 Since it is an equitable doctrine, its application is likewise controlled by reasonable considerations. Thus, the better rule is that courts, under the principle of equity, should not be bound by the doctrine of laches if wrong or injustice will result. 22 Given the attendant circumstances, laches cannot stall respondents right to recover what is due to it especially where BOCs negligence in the safekeeping of the goods appears indubitable. There is no denying that BOC exhibited gross carelessness and ineptitude in the performance of its duty as it could not even explain why or how the goods vanished while in its custody. With this, it is difficult to exonerate petitioner from liability; otherwise, we would countenance a wrong and exacerbate respondents loss which to this day has remained unrecompensed. More importantly, laches never set in because respondent filed its petition for revival of judgment within the period set by the Rules. In particular, Rule 39, Section 6 states: SEC. 6. Execution by motion or by independent action. A final and executory judgment or order may be executed on motion within five (5) years from the date of its entry. After the lapse of such time, and before it is barred by the statute of limitations, a judgment may be enforced by action. The revived judgment may also be enforced by motion within five (5) years from the date of its entry and thereafter by action before it is barred by the statute of limitations. Furthermore, Article 1144 of the Civil Code, an action "upon a judgment" may be brought within ten (10) years from the time the right of action accrues. The CTA judgment sought to be revived became final and executory on July 20, 1992 23 and was accordingly entered into the book of judgments on the same date. On the other hand, the petition to revive said judgment was filed on September 5, 2001. Clearly, the filing of the petition for the revival of judgment was well within the reglementary period provided by law.

Legal Interest May Be Imposed for Use of Money or as Compensatory Damages Petitioner likewise argues that the CA erred in imposing the 6% p.a. legal interest. According to petitioner, the obligation to pay legal interest only arises by virtue of a contract or on account of damages due to delay or failure to pay the principal on which the interest is exacted. It added that since the June 15, 1992 CTA decision did not involve a monetary award but merely the release of the goods to respondent, there was no basis for the computation and/or imposition of the 6% p.a. legal interest. We agree with petitioner. Interest may be paid only either as compensation for the use of money (monetary interest)24 or as damages (compensatory interest).25 We quote in agreement the CTAs disquisition in its decision dated September 19, 2002: Interest may be paid either as compensation for the use of money (monetary interest) referred to in Article 1956 of the New Civil Code or as damages (compensatory interest) under Article 2209 above cited. As clearly provided in [Article 2209], interest is demandable if: a) there is monetary obligation and b) debtor incurs delay. This case does not involve a monetary obligation to be covered by Article 2209. There is no dispute that this case was originally filed questioning the seizure of the shipment by the Bureau of Customs. Our decision subject of this action for revival [of judgment] did not refer to any monetary obligation by [petitioner] towards the [respondent]. In fact, if there was any monetary obligation mentioned, it referred to the obligation of [respondent] to pay the correct taxes, duties, fees and other charges before the release of the goods can be had. In one case, the Supreme Court held: "In a comprehensive sense, the term "debt" embraces not merely money due by contract, but whatever one is bound to render to another, either for contract or the requirement of the law, such as tax where the law imposes personal liability therefor." Therefore, the government was never a debtor to the petitioner in order that [Article] 2209 could apply. Nor was it in default for there was no monetary obligation to pay in the first place. There is default when after demand is made either judicially or extrajudicially. In other words, for interest to be demandable under Article 2209, there should be a monetary obligation and the debtor was in default In the instant case, [petitioner] was never under monetary obligation to [respondent], no demand can be made either judicially or extrajudicially. Parallel thereto, there could be no default 26 No doubt, the present case does not fall within the first situation. Neither can it be considered as one involving interest based on damages under the second situation. More importantly, interest is not chargeable against petitioner except when it has expressly stipulated to pay it or when interest is allowed by the legislature or in eminent domain cases where damages sustained by the owner take the form of interest at the legal

rate.27 Consequently, the CAs imposition of the 12% p.a. legal interest upon the finality of the decision of this case until the value of the goods is fully paid (as forbearance of credit) is likewise bereft of any legal anchor. Government Liability For Actual Damages Finally, petitioner argues that a money judgment or any charge against the government requires a corresponding appropriation and cannot be decreed by mere judicial order. Although it may be gainsaid that the satisfaction of respondents demand will ultimatel y fall on the government, and that, under the political doctrine of "state immunity," it cannot be held liable for governmental acts (jus imperii),28 we still hold that petitioner cannot escape its liability. The circumstances of this case warrant its exclusion from the purview of the state immunity doctrine. As previously discussed, the Court cannot turn a blind eye to BOCs ineptitude and gross negligence in the safekeeping of respondents goods. We are not likewise unaware of its lackadaisical attitude in failing to provide a cogent explanation on the goods disappearance, considering that they were in its custody and that they were in fact the subject of litigation. The situation does not allow us to reject respondents claim on the mere invocation of the doctrine of state immunity. Succinctly, the doctrine must be fairly observed and the State should not avail itself of this prerogative to take undue advantage of parties that may have legitimate claims against it.29 In Department of Health v. C.V. Canchela & Associates,30 we enunciated that this Court, as the staunch guardian of the peoples rights and welfare, cannot sanction an injustice so patent in its face, and allow itself to be an instrument in the perpetration thereof. Over time, courts have recognized with almost pedantic adherence that what is inconvenient and contrary to reason is not allowed in law.31 Justice and equity now demand that the States cloak of invincibility against suit and liability be shredded. Accordingly, we agree with the lower courts directive that, upon payment of the necessary customs duties by respondent, petitioners "payment shall be taken from the sale or sales of goods or properties seized or forfeited by the Bureau of Customs."32 WHEREFORE, the assailed decisions of the Court of Appeals in CA-G.R. SP Nos. 75359 and 75366 are herebyAFFIRMED with MODIFICATION. Petitioner Republic of the Philippines, represented by the Commissioner of the Bureau of Customs, upon payment of the necessary customs duties by respondent Unimex Micro-Electronics GmBH, is hereby ordered to pay respondent the value of the subject shipment in the amount of Euro 669,982.565. Petitioners liability may be paid in Philippine currency, computed at the exchange rate prevailing at the time of actual payment. SO ORDERED. RENATO C. CORONA Associate Justice

WE CONCUR:

G.R. No. 134114

July 6, 2001

NESTLE PHILIPPINES, INC., (FORMERLY FILIPRO, INC.), petitioner, vs. HONORABLE COURT OF APPEALS, COURT OF TAX APPEALS and COMMISSIONER OF CUSTOMS,respondents. DELEON, JR., J.: Challenged in this petition for review on certiorari is the Decisio1 in CA-G.R SP No. 431882 dated September 23, 1997 of the Court of Appeals which affirmed the Decision3 dated May 30, 1995 of the Court of Tax Appeals in C.T.A. Case No. 44784 dismissing petitioner's petition for review to compel the Commissioner of Customs to grant it a refund of allegedly overpaid import duties, on its various importations of milk and milk products, amounting to Five Million Eight Thousand and Twenty-Nine Pesos (P5,008,029.00). Petitioner's motion for reconsideration thereof was denied by the Court of Appeals in a Resolution5 dated June 9, 1998. The antecedent facts are as follows. Petitioner is a duly organized domestic corporation engaged in the importations of milk and milk products for processing, distribution and sale in the Philippines. Between July and November 1984, petitioner transacted sixteen (16) separate importations of milk and milk products from different countries. Petitioner was assessed customs duties and advance sales taxes by the Collector of Customs of Manila for each of these separate importations on the basis of the published Home Consumption Value (HCV) indicated in the Bureau of Customs Revision Orders. Petitioner paid the same but seasonably filed the corresponding protests before the said Collector of Customs from October 25 to December 5, 1984, uniformly alleging therein that the latter erroneously applied higher home consumption values in determining the dutiable value for each of these separate importations. In the said protests, petitioner claims for refund of both the alleged overpaid import duties amounting to Five Million Eight Thousand and Twenty-Nine Pesos (P5,008,029.00) and advance sales taxes aggregating to Four Million Five Hundred Sixty-Four Thousand One Hundred Seventy-Nine Pesos and Thirty Centavos (P4,564,179.30). On October 14, 1986, petitioner formally filed a claim for refund of allegedly over paid advance sales taxes with the Bureau of Internal Revenue (BIR) amounting to Four Million Five Hundred Sixty-Four Thousand One Hundred Seventy-Nine Pesos and Thirty Centavos (P4,564,179.30) covering the same sixteen (16) importations of milk and milk products from different countries. Not long after, on October 15, 1986 and within the two-year prescriptive

period provided for under the National Internal Revenue Code (NIRC) for claiming a tax refund, petitioner filed the corresponding petition for review with the Court of Tax Appeals (CTA) which was docketed therein as C.T.A. Case No. 4114. On January 3, 1994, the tax court ruled in favor of petitioner and forthwith ordered the BIR to refund to the petitioner the sum of Four Million Four Hundred Eighty-Nine Thousand Six Hundred Sixty-One Pesos and Ninety-Four Centavos (P4,489,661.94) representing the overpaid Advance Sales Taxes on the aforesaid importations. On the other hand, the sixteen (16) protest cases for refund of alleged overpaid customs duties amounting to Five Million Eight Thousand Twenty-Nine Pesos (P5,008,029.00) were left with the Collector of Customs of Manila. However, the said Collector of Customs failed to render his decision thereon after almost six (6) years since petitioner paid under protest the customs duties on the said sixteen (16) importations of milk and milk products and filed the corresponding protests. Consequently, in order to prevent these claims from becoming stale on the ground of prescription, petitioner immediately filed a petition for review docketed as C.T.A. Case No. 4478, with the Court of Tax Appeals on August 2, 1990 despite the absence of a ruling on its protests from both the Collector of Customs of Manila and the Commissioner of Customs. On May 30, 1995, the CTA rendered judgment dismissing C.T.A. Case No. 4478 for want of jurisdiction.6 The subsequent motion or reconsideration filed petitioner on July 11, 1995 was denied for lack of merit in a Resolution' dated January 6, 1997. Aggrieved, petitioner appealed on February 10, 1999 the said judgment and resolution of the CTA in C.T.A. Case No. 4478 to the Court of Appeals by way of petition for review on certiorari under Rule 45 of the Rules of Court. However, this appeal was later dismissed by the appellate court on September 23, 1997 for lack of merit. The Court of Appeals opined, inter alia, that the CTA's jurisdiction is not concurrent with the appellate jurisdiction of the Commissioner of Customs since there was no decision or ruling yet of the Collector of Customs of Manila on the matter; that the petition does not fall under any of the recognized exceptions on exhaustion of administrative remedies to justify petitioner's immediate resort to the CTA; that the petitioner failed to move for the early resolution of its claims for refund nor was there any notice given that the said Collector of Customs' continued inaction on its claims would be deemed a denial of its claims; and that petitioner also neglected to cite any law or jurisprudence which prescribes a period for filing an appeal in the CTA even if there was no action yet by the Commissioner of Customs. On June 9, 1998, the appellate court issued a Resolution8 denying petitioner's motion for reconsideration for lack of merit. Hence, this petition. Petitioner assigns the following as errors, to wit: 1. RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION IN HOLDING THAT THE FILING OF PROTEST CASES BEFORE

THE COLLECTOR OF CUSTOMS HAD EFFECTIVELY INTERRUPTED THE RUNNING OF THE SIX-YEAR PRESCRIPTIVE PERIOD; 2 RESPONDENT COURTS COMMITED FUNDAMENTAL ERRORS AND ACTED WITH GRAVE ABUSE OF DISCRETIONS IN HOLDING THAT PETITIONER HAD FAILED TO EXHAUST ADMINISTRATIVE REMEDIES, NOTWITHSTANDING ALMOST 6 YEARS OF PROTRACTED HEARINGS OF THE 16 PROTEST CASES WITH THE CUSTOMS COLLECTOR AND FILING OF THE PETITION ONLY WHEN THE SIX-YEAR PRESCRIPTIVE PERIOD WAS ABOUT TO EXPIRE TO AVOID NULLIFICATION OF CLAIMS ON GROUND OF PRESCRIPTION; 3. THE RESPONDENT COURTS GRAVELY ERRED IN DISMISSING ON SHEER TECHNICALITIES PETITIONER'S CLAIMS FOR THE REFUND OF P5,008,029.08 (SIC) OVERPAID DUTIES, WHEN THE FACTS OF OVERPAYMENTS HAD BEEN EARLIER RESOLVED IN CTA CASE NO. 4114, HOLDING THAT THE WRONG APPLICATION OF THE HIGHER HOME CONSUMPTION VALUES RESULTED IN THE OVERPAYMENTS OF DUTIES AND TAXES, AND UPON WHICH, IT ORDERED THE REFUND OF P4,489,661.94 IN OVERPAID TAXES. THERE IS NO VALID REASON THEREFORE WHY THE CORRESPONDING OVERPAYMENTS IN CUSTOMS DUTIES CAN NOT ALSO BE REFUNDED TO ITS RIGHTFUL OWNER, THE PETITIONER HEREIN. In this petition, petitioner asserts that tax refunds are based on quasi-contract or solution indebiti, which under Article 11459 of the Civil Code, prescribes in six (6) years. Consequently, the pendency of its protest cases before the office of the Collector of Customs of Manila did not interrupt the running of the prescriptive period under the aforesaid provision of law considering that it is only an administrative body performing only quasi-judicial function and not a regular court of justice.10 Thus, in like manner the thirty-day period for appealing to the CTA must be made within the six-year prescriptive period. Petitioner further contends that the fact of overpayment of customs duties has been duly established and resolved with finality by the Court of Tax Appeal on January 3, 1994 in C.T.A. Case No. 4114.11 In that case, the tax court found that the Bureau of Customs erroneously used the wrong home consumption value in assessing the petitioner the Advance Sales Tax on its subject sixteen (16) importations. The tax court then ordered the Commissioner of Internal Revenue to refund to the petitioner the sum of Four Million Four Hundred Eighty-Nine Thousand Six Hundred Sixty-One Pesos and Ninety-Four Centavos (P4,489,661.94), representing overpaid advance sales tax covering the same sixteen (16) importations. It is also from the same sixteen (16) separate importations of milk and milk products that petitioner based its claims for refund of overpayment of customs duties. Thus, petitioner avers that its claims for refund of overpaid customs duties must likewise be granted and awarded in its favor. In lieu of Comment,12 the Solicitor General manifested that there is merit in petitioner's argument considering that petitioner's cause of action to recover a tax erroneously paid is based on solutio indebiti which is expressly classified as a quasi-contract under the Civil Code; that petitioner's cause of action would have prescribed on August 2, 1990 if it did not bring the matter before the CTA; and that the Collector of Customs has not even acted or

resolved the petitioner's several protests it had filed before his office within six (6) years after it made the earliest payment of advance customs duties on its importations. There was also no violation of the principle of exhaustion of administrative remedies in this case. This doctrine does not apply to the case at bar since its observance would only result in the nullification of the claim for refund being asserted nor would it provide a plain, speedy and adequate remedy under the circumstances. This notwithstanding, however, the Solicitor General further opined that this case should be remanded to the CTA in order for the tax court to determine the veracity of petitioner's claim. On the other hand, respondent Commissioner of Customs, in his Comment 13 dated August 21, 2000, admitted with regret, their official inaction adverted to by the petitioner. Respondent Commissioner expressed the view that petitioner's claim for refund of customs duties should not outrightly be denied by virtue of the strict adherence to the rules to prevent grave injustice to hapless taxpayers; that this does not justify, however, an outright award of the refund of alleged overpayment of customs duties in favor of petitioner; and that there is no definite factual determination yet that the customs duties and taxes in question were overpaid and refundable, and if refundable how much is the refundable amount. The fact that the Collector of Customs of Manila failed to act or decide on the petitioner's protest cases filed before his Office does not relieve the petitioner of its burden to prove that it is entitled to the refund sought for. Thus, respondent Commissioner of Customs, thru his special counsel, recommended that this case be remanded to the court of origin, namely, the CTA. The recommendations of both the Solicitor General and the respondent Commissioner of Customs are well taken. After a meticulous consideration of this case, we find that the recommended remand of this case to the CTA is warranted for the proper verification and determination of the factual basis and merits of this petition and in, order that the ends of substantial justice and fair play may be subserved. We are of the view that the said recommendation is in accord with the provisions of the Tariff and Customs Code as hereinafter discussed. The right to claim for refund of customs duties is specifically governed by Section 1708 of the Tariff and Customs Code, which provides that "Sec. 1708. Claim for Refund of Duties and Taxes and Mode of Payment . - All claims for refund of duties shall be made in writing and forwarded to the Collector to whom such duties are paid, whoupon receipt of such claim, shall verify the same by the records of his Office, and if found to be correct and in accordance with law, shall certify the same to the Commissioner with his recommendation together with all necessary papers and documents. Upon receipt by the Commissioner of such certified claim he shall cause the same to be paid if found correct." It is clear from the foregoing provision of the Tariff and Customs Code that in all claims for refund of customs duties, the Collector to whom such customs duties are paid and upon receipt of such claim is mandated to verify the same by the records of his Office. If such claim is found correct and in accordance with law, the Collector shall certify the same to the

Commissioner with his recommendation together with all, the necessary papers and documents. This is precisely one of the reasons why the Court of Appeals upheld the dismissal of the case on the ground that the CTA's jurisdiction14 under the Tariff and Customs Code is not concurrent with that of the respondent Commissioner of Customs due to the absence of any certification from the Collector of Customs of Mani]a. Accordingly, petitioner's contention that its claims for refund of alleged overpayment of customs duties may be deemed established from the findings of the tax court in C.T.A. Case No. 4114 on the Advance Sales Tax is not necessarily corrupt in the light of the above-cited provision of the Tariff and Customs Code. "Customs duties" is 'the name given to taxes on the importation and exportation of commodities, the tariff or tax assessed upon merchandise imported from, or exported to, a foreign country.15 Any claim, for refund of customs duties, therefore, take the nature of tax exemptions that must be construed strictissimi juris against the claimants and liberal]y in favor of the taxing authority.16 This power of taxation being a high prerogative of sovereignty, its relinquishment is never presumed. Any reduction or diminution thereof with respect to its mode or its rate must be strictly construed, and the same must be couched in clear and unmistakable terms in order that it may be applied. 17 Thus, any outright award for the refund of allegedly overpaid customs duties in favor of petitioner on its subject sixteen (16) importations is not favored in this jurisdiction unless there is a direct and clear finding thereon. The fact alone that the tax court, in C.T.A Case No. 4114, has awarded in favor of the petitioner the refund of overpaid Advance Sales Tax involving the same sixteen (16) importations does not in any way excuse the petitioner from proving its claims for refund of alleged over payment of customs duties. We have scrutulized the decision rendered by the tax court C.T.A. Case No. 4114 and found no clear indication therein that the tax court has ruled on petitioner's claims for alleged overpayment of customs duties. The petitioner is mistaken in its contention that its claims for refund of allegedly overpaid customs duties are governed by Article 215418 of the New Civil Code on quasi-contract, or the rule on solutio indebiti, which prescribes in six (6) years pursuant to Article 1145 of the same Code. Sections 2308 and 2309 of the Tariff and Customs Code provide that: "Sec. 2308. Protest and Payment upon Protest in Civil Matter: When a ruling or decision of the collector is made whereby liability for duties , taxes, fees, or other charges are determined, except the fixing of fines in seizures cases, the party adversely affected may protest such ruling or decision by presenting to the Collector at the time when payment of the amount claimed to be due the governmentis made, or within fifteen (15) days thereafter, a written protest setting forth his objection to the ruling or decision in question, together with the reasons therefor. No protest shall be considered unless payment of the amount due after final liquidation has first been made and the corresponding docket fee, as provided for in Section 3301."

"Sec. 2309. Protest Exclusive Remedy in Protestable Case. In all cases subject to protest, the interested party who desires to have the action of the collector reviewed, shall make a protest, otherwise, the action of the collector shall be final and conclusive against him, x x x. " "SEC. 2312. Decision or Action by the collector in Protest and Seizure Cases. When a protest in a proper form is presented in a case where protest is required, the collector shall issue an order for hearing within fifteen (15) days from receipt of the protest and hear the matter thus presented. Upon termination of the hearing, the Collector shall render a decision within thirty (30) days, and if the protest is sustained, in whole or in part, he shall make the appropriate order, the entry reliquidated necessary, xxx," In the light of the abovecited provisions of the Tariff and Customs Code, it appears that in all cases subject to protest, the claim for refund of customs duties may be foreclosed only when the interested party claiming refund fails to file a written protest before the Collector of Customs. This written protest which must set forth the claimant's objection to the ruling or decision in question together with the reasons therefor must be made either at the time when payment of the amount claimed to be due the government is made or within fifteen (15) days thereafter. In conjunction with this right of the claimant is the duty of the Collector of Customs to hear and decide such protest in accordance and within the period of time prescribed by the law. Accordingly, once a written protest is seasonably filed with the Collector of Customs the failure or inaction of the latter to promptly perform his mandated duty under the Tariff and Customs Code should not be allowed to prejudice the right of the party adversely affected thereby. Technicalities and legalisms, however exalted, should not be misused by the government to keep money not belonging to it, if any is proven, and thereby enrich itself at the expense of the tax payers. If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess payments, if any, of such taxes. Indeed the State must lead by its own example of honor, dignity and uprightness. Here, it is undisputed that the inaction of the Collector of Customs of Manila for nearly six (6) years on the protests seasonably filed by the petitioner has caused the latter to immediately resort to the CTA. The petitioner did so on the mistaken belief that its claims are governed by the rule on quasi-contract or solutio indebiti which prescribes in six (6) years under Article 1145 of the New Civil Code. This belief or contention of the petitioner is misplaced. In order for the rule on solution indebiti to apply it is an essential condition that petitioner must first show that its payment of the customs duties was in "excess of what was required by the law at the time when the subject sixteen (16) importations of milk and milk products were made. Unless shown otherwise, the disputable presumption of regularity of performance of duty lies in favor of the Collector of Customs. In the present case, there is no factual showing that the collection of the alleged overpaid customs duties was more than what is required of the petitioner when it made the aforesaid

separate importations. There is no factual finding yet by the government agency concerned that petitioner is indeed entitled to its claim of overpayment and, if true, for how much it is entitled. It bears stress that in determining whether or not petitioner is entitled to refund of alleged overpayment of customs duties, it is necessary to determine exactly how much the Government is entitled to collect as customs duties on the importations. Thus, it would only be just and fair that the petitioner-taxpayer and the Government alike be given equal opportunities to avail of the remedies under the law to contest or defeat each other's claim and to determine all matters of dispute between them in one single case.19 If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess payments, if truly proven, of such taxes. Indeed, the State must lead by its own example of honor, dignity and uprightness. The ratiocination of the Court of Appeals is in accord with a ruling of this Court which is applicable to the case at bar, to wit: "As stated by the respondent court in its Resolution dated January 6, 1997, the petitioner's claim cannot be deemed to prescribe because the Collector of Customs has not acted on the protest, and the period for filling an appeal to the Commissioner of Customs has not commenced to run. Moreover, delay or inaction of a subordinate official, does not constitute an exception to the afore-cited principle as the delay should be brought to the attention of a superior administrative officer for immediate adjudication (Commissioner of Immigration vs. Vamenta, Jr., 54 SCRA 342; Barte vs. Dichoso, 47 SCRA 77)." WHEREFORE, the assailed Decision dated September 23,1997 of the Court of Appeals in CA-G.R SF No. 43188 is hereby SET ASIDE; and C.T.A. Case No. 4478 is REINSTATED and REMANDED to the Court of Tax Appeals for hearing and reception of evidence relative to petitioner's claims for refund of alleged overpayment of customs duties. The Court of Tax Appeals is directed to dispose of the said case with dispatch.
1w phi1.nt

SO ORDERED. Bellosillo, Mendoza, and Buena, JJ., concur.

G.R. No. 144440

September 1, 2004

COMMISSIONER OF CUSTOMS, petitioner, (CLAIM ALLOWED UNDER SOLUTIO INDEBITI) vs. PHILIPPINE PHOSPHATE FERTILIZER CORPORATION, respondent. DECISION

TINGA, J.: The financial planners of the State are often confounded by the precarious balance between the need to provide a conducive investment climate and the need to enhance revenue collections. In the present Petition for Review, the Court is called upon to interpret the provisions of a law designed to benefit investors with tax exemptions. Tax exemptions are generally construed strictly against the taxpayer; yet, when the purported ambiguities in the law are more imagined than real, there should be no hesitation to rule for the taxpayer. The factual backdrop of the case is uncomplicated. Respondent Philippine Phosphate Fertilizer Corporation (Philphos) is a domestic corporation engaged in the manufacture and production of fertilizers for domestic and international distribution. Its base of operations is in the Leyte Industrial Development Estate, an export processing zone.1 It is also registered with the Export Processing Zone Authority (EPZA), now known as the Philippine Export Zone Authority (PEZA). 2 The manufacture of fertilizers required Philphos to purchase fuel and petroleum products for its machineries. These fuel supplies are considered indispensable by Philphos, as they are used to run the machines and equipment and in the transformation of raw materials into fertilizer.3 The fuel supplies are secured domestically from local distributors, in this case, Petron Corporation (Petron), which imports the same and pays the corresponding customs duties to the Bureau of Customs; and, the ad valorem and specific taxes to the Bureau of Internal Revenue. When the fuel and petroleum products are delivered at Philphoss manufacturing plant inside the Leyte Industrial Development Estate, Philphos is billed by Petron the corresponding customs duties imposed on these products. Effectively thus, Philphos reimburses Petron for the customs duties on the purchased fuels and petroleum products which are passed on by the Petron as part of the selling price. 4 Under this arrangement, Philphos made several purchases from Petron of fuels and other petroleum products used directly or indirectly in the manufacture of fertilizers for the period of October 1991 until June 1992.5 During the period in question, Philphos indirectly paid as customs duties, the amount of Twenty Million One Hundred Forty Nine Thousand Four Hundred Seventy Three Pesos and Seventy Seven Centavos (P20,149,473.77).6 In a letter to the Bureau of Customs, dated 18 September 1992, Philphos sought the refund of customs duties it had paid for the period covering the months of October to December 1991, and January to June, 1992.7 It pointed out that Philphos, being an enterprise registered with the export processing zone, is entitled to tax incentives under Presidential Decree No. 66 (EPZA Law), referring specifically to Section 17 thereof which exempts from customs and internal revenue laws, supplies brought into the export processing zone. Consequently, Philphos argued that the customs duties billed by Petron on Philphos should be refunded. The Bureau of Customs denied the claim for refund in a letter dated 4 January 1993.8 Hence, a Petition for Review was filed with the Court of Tax Appeals (CTA), assailing the denial of the refund. The CTA ruled for Philphos in a Decision9 dated 5 October 1995, ordering the issuance of a Tax Credit Certificate in the amount of Twenty Million One

Hundred Forty Nine Thousand Four Hundred Seventy Three Pesos and Seventy Seven Centavos (P20,149,473.77) in favor of Philphos. The matter was elevated by the Commissioner of Customs (Commissioner) to the Court of Appeals (CA), which eventually affirmed the CTAs Decision in toto.10 Both the CTA and the CA relied upon Section 17(1) of the EPZA Law to justify the conclusion that Philphos is entitled to the refund. Before this Court, the Commissioner argues that since the importation of the subject products, made by the seller Petron, had already been finally terminated, all future claims for refund are thus barred. It likewise insists that controlling in this case is Section 18(i) of the EPZA Law, under which claims for refunds similar to Philphoss are precluded. Finally, the Commissioner posits that since a refund on tax credit partakes the nature of an exemption, the grant thereof must be explicit. There is no need to inquire into the factual basis for the amount sought to be refunded.11 Petitioner does not dispute the amount, but only the legal basis for the exemption. Moreover, since the Court itself is not a trier of facts it will respect primarily the findings of the ultimate trier of facts, namely: the CA. In this case, however, there is coalescence in the findings of the two courts below. The EPZA Law, promulgated in 1972, has since been superseded by Republic Act No. 7916, or "The Special Economic Zone Act of 1995." However, since the claim for exemption covers the years 1991 and 1992, or before the enactment of Republic Act No. 7916, the provisions of the EPZA Law are applicable in the present petition. Consideration of the general philosophy and thrust of the EPZA Law cannot be evaded. The export processing zone is intended to be a viable commercial, industrial and investment area.12 The enunciated policy of the EPZA Law is to encourage and promote foreign commerce as a means of making the Philippines a center of international trade; strengthening our export trade and foreign exchange position; hastening industrialization; reducing domestic unemployment; and accelerating the development of the country, by establishing export processing zones in strategic locations in the Philippines.13 As noted by the CTA, the basic policy in establishing export processing zones is to attract enterprises, especially foreign investors, who will be manufacturing products primarily for export and be able to do so without their supplies and raw materials entering, and the export products leaving, the Philippine territory within the context of customs and revenue regulations.14 From a macro-perspective though, export processing zones are not intended to solely benefit investors. These zones are scattered throughout the country in remote areas and have the patent benefit of creating employment opportunities within their localities. It is the presence of tangible tax benefits attached to these zones which make them viable as investment locations, areas which ordinarily would be overlooked. The incentives offered to enterprises duly registered with the PEZA consist, among others, of tax exemptions. These benefits may, at first blush, place the government at a disadvantage as they preclude the collection of revenue. Still, the expectation is that the tax breaks ultimately redound to the benefit of the national economy, enticing as they do more enterprises to invest and do business within the zones; thus creating more employment opportunities and infusing more dynamism to the vibrant interplay of market forces.

Section 17 of the EPZA Law particularizes the tax benefits accorded to duly registered enterprises. It states: SEC. 17. Tax Treatment of Merchandize in the Zone. (1) Except as otherwise provided in this Decree, foreign and domestic merchandise, raw materials, supplies, articles, equipment, machineries, spare parts and wares of every description, except those prohibited by law, brought into the Zone to be sold, stored, broken up, repacked, assembled, installed, sorted, cleaned, graded, or otherwise processed, manipulated, manufactured, mixed with foreign or domestic merchandise or used whether directly or indirectly in such activity, shall not be subject to customs and internal revenue laws and regulations nor to local tax ordinances, the following provisions of law to the contrary notwithstanding . (emphasis supplied) The cited provision certainly covers petroleum supplies used, directly or indirectly, by Philphos to facilitate its production of fertilizers, subject to the minimal requirement that these supplies are brought into the zone. The supplies are not subject to customs and internal revenue laws and regulations, nor to local tax ordinances. It is clear that Section 17(1) considers such supplies exempt even if they are used indirectly, as they had been in this case. Since Section 17(1) treats these supplies for tax purposes as beyond the ambit of customs laws and regulations, the arguments of the Commissioner invoking the provisions of the Tariff and Customs Code must fail. Particularly, his point that the importation of the petroleum products by Petron was deemed terminated under Section 120215 of the Tariff and Customs Code, and that the termination consequently barred any future claim for refund under Section 160316 of the same law is misplaced and inconsequential. Moreover, the cited provisions of the Tariff and Customs Code if related to Section 17(1) of the EPZA Law would significantly render the argument strained and, if upheld, obviate many of the benefits granted by Section 17(1), for the provision does not limit the tax exemption only to direct taxes. Following the Commissioners interpretation, any duly registered enterprise sought to be held liable for the controverted customs duty because the importer had shifted the duty to the buyer would forever be precluded from challenging the duty, which it is not in the first place obliged to pay under the law. Hand in hand with its patent noxiousness to the spirit of the EPZA Law, the approach calls for the unwarranted application of the Tariff and Customs Code to investors and players in the zones, which under the EPZA Law are beyond the reach of domestic customs and tax laws, as well as regulations. Neither would the prescriptive periods or procedural requirements provided under the Tariff and Customs Code serve as a bar for the claim for refund. The holding of the CTA on this point is illuminating: Contrary to the allegation of the Respondent that Section 17(1) does not provide for duty and tax exemption privilege, this Court disagrees. That phrase shall not be subject to customs and internal revenue laws and regulations nor to local tax ordinances, the provisions of law to the contrary notwithstanding cannot be interpreted in any other manner than to mean that merchandise or supplies brought into the zone are exempt from customs duties and taxes. The incentive given under

Section 17(1) is broader than a mere tax exemption. The phrase is so broad to include not only the exemption from customs duties and taxes but everything required in the enforcement of the customs and internal revenue laws save on the exceptions and conditions specified in the EPZA law itself. Considering that the customs and internal revenue laws are primarily enacted to impose duties and taxes, the phrase cannot be interpreted to exclude these impositions. More so, the phrase will also include exemption from other rules and regulations which are normally followed in the discharge of importation such as the filing of import entries, examinations and other requirements attendant to the importation of goods into the country.17 Even our recent ruling in Nestle Philippines, Inc. v. Court of Appeals,18 to the effect that the claim for refund of customs duties in protestable cases may be foreclosed by the failure to file a written protest, is not apropos in the case at bar because petitioner therein was not a duly registered enterprise under the EPZA Law and thus not entitled to the exemptions therein.19 This leads to another question well-worth resolving what is the prescriptive period which a duly registered enterprise should observe in applying for a refund to which it is entitled under the EPZA Law? The EPZA Law itself is silent on the matter, and the prescriptive periods under the Tariff and Customs Code and other revenue laws are inapplicable, by specific mandate of Section 17(1) of the EPZA Law. This does not mean though that prescription will not lie, as the Civil Code provisions on solutio indebiti20 may find application. The Civil Code is not a customs and internal revenue law. The Court has in the past sanctioned the application of the provisions on solutio indebiti in cases when taxes were collected thru error or mistake.21 Solutio indebitiis a quasi-contract, thus the claim for refund must be commenced within six (6) years from date of payment pursuant to Article 1145(2) of the New Civil Code.22 Clearly then, Philphoss right to refund has not yet prescribed. Still, the Commissioner insists that it is Section 18(i) of the EPZA Law that is applicable, and precludes Philphoss claim for refund. The provision reads: SEC. 18. Additional Incentives. A zone registered enterprise shall also enjoy the following incentives: xxx (i)Tax credit. Every registered zone enterprise shall enjoy a tax credit equivalent to the sales, compensating and specific taxes and duties on supplies, raw materials and semi-manufactured products used in the manufacture, processing or production of its export products and forming part thereof; x x x. (emphasis supplied)23 Indubitably, Section 18 does not exclude or otherwise limit the broad grant of benefits accorded by Section 17. These "additional incentives" under Section 18 are to be enjoyed in conjunction with the incentives under Section 17. This is indicated by the use of the words "additional" and "shall also" in the first paragraph of Section 18. Even the Commissioner

admits the distinct character of Section 18.24 The divergent natures of the benefits under Sections 17 and 18 become readily apparent upon examination of the additional incentives enumerated under Section 18. They include allowance of net-operating loss carry-over, accelerated depreciation, exemption from export tax, foreign exchange assistance, financial assistance, exemptions for local taxes and licenses, deductions for labor training services, and deductions for organizational and pre-operating expenses.25 Section 18 does not serve the purpose of qualifying the benefits provided under Section 17. Instead, it enumerates another class of incentives also available to registered enterprises, in addition to, and apart from, the general benefits accorded under Section 17. There can be no doubt that the additional incentives under Section 18 are separate and distinct from those under the preceding section. Still, the Commissioner argues that Section 18(i) of the EPZA Law specifically controls the issuance of a tax credit equivalent to duties on supplies purchased, and that the provision clearly states that such supplies must form part of the export products, particularly fertilizer. A plain reading of Section 18(i) unmistakably indicates that the tax credit as an additional incentive avails only if the supplies actually form part of the export products. There is an apparent distinction between this provision and Section 17(1) which exempts from taxation supplies used indirectly by the registered enterprise. It is apparent that the petroleum supplies in question, which physically do not form part of the exportable fertilizers, are exempt from taxation under Section 17(1), but no tax credit could be claimed on them under Section 18(i). Still, this acknowledged distinction is not a cause for abject reversal of the assailed decisions, as it does not affect the key disposition. For Section 17(1) is determinative of the fundamental question whether there is legal basis for the claim of exemption. On the other hand, Section 18(i) does not impose limitations on the exemptions granted in the preceding provisions, but would only affect, if at all, the modality by which the exemption takes form. Obviously, the relief sought for erroneously paid taxes would be a return to the taxpayer of the amount paid to the government. The Tax Reform Act of 1997 authorizes either a refund or credit as a means of recovery of tax erroneously or illegally collected.26 It may be that there is no essential difference between a tax refund and a tax credit since both are modes of recovering taxes erroneously or illegally paid to the government.27 Yet, there are unmistakable formal and practical differences between the two modes. Formally, a tax refund requires a physical return of the sum erroneously paid by the taxpayer, while a tax credit involves the application of the reimbursable amount against any sum that may be due and collectible from the taxpayer.28 On the practical side, the taxpayer to whom the tax is refunded would have the option, among others, to invest for profit the returned sum, an option not proximately available if the taxpayer chooses instead to receive a tax credit. It should be noted that in its initial letter to the Commissioner dated 18 September 1992, Philphos specifically requested the refund of Twenty Million One Hundred Forty Nine Thousand Four Hundred Seventy Three Pesos and Seventy Seven Centavos (P20,149,473.77). However, in its Petition for Review before the CTA, Philphos prayed for the issuance of "corresponding tax credits" in the same amount. Still, there is no vehement

insistence on the part of Philphos that the return of the amount paid should come in the form of a refund or a credit.29 The CTA, as affirmed by the CA, ordered the issuance of a Tax Credit Certificate in favor of Philphos. No elaboration was made as to why the relief granted was a tax credit and not a refund, but we can deduce that such was the relief afforded as it was the relief prayed for by Philphos in its Petition before the tax court. However, a slight modification of the award is necessary so as not to render nugatory the proscription under Section 18(i) that a tax credit avails only if the supplies form part of the export product. Instead of awarding a Tax Credit Certificate to Philphos, a refund of the same amount is warranted under the circumstances. The grant of exemption under Section 17(1) is clear and unambiguous. There is neither logic nor need to cast a speck of uncertainly on a doubt-free situation to resolve the resulting forced question in favor of the government. The disposition arises not out of a blind solicitude towards the concerns of business, but from the duty to affirm and enforce a crystal-clear legislative policy and initiative intent. Indeed, the revenue collectors of the government should be cautious before attempting to gut away at concessions the State itself has deemed worthy of award to deserving investors. It is unsound practice and uncouth behaviour to invite over guests to dinner at home, then charge them for the use of the silverware before allowing them to dine. WHEREFORE, the Petition for Review is DENIED. The assailed Decisions of the Court of Appeals dated 4 August 2000 and of the Court of Tax Appeals dated 5 October 1995 are AFFIRMED, with modification that in lieu of the issuance of a Tax Credit Certificate, the amount of Twenty Million One Hundred Forty Nine Thousand Four Hundred Seventy Three Pesos and Seventy Seven Centavos (P20,149,473.77) be refunded to respondent Philippine Phosphate Fertilizer Corporation. No costs. SO ORDERED. Puno*, Austria-Martinez**, Callejo, Sr., and Chico-Nazario, JJ., concur. G.R. No. 185588 February 2, 2010

PHILIPPINE BRITISH ASSURANCE COMPANY, INC., Petitioner, vs. REPUBLIC OF THE PHILIPPINES, represented by the BUREAU OF CUSTOMS (BOC), Respondent. DECISION VELASCO, JR., J.: The Case This Petition for Review on Certiorari under Rule 45 seeks to reverse and set aside the July 23, 20081 and November 28, 20082 Resolutions of the Court of Appeals (CA) in CA-G.R. CV

No. 88786, entitled Republic of the Philippines represented by the Bureau of Customs (BOC) v. Philippine British Assurance Company, Inc. The Facts Petitioner Philippine British Assurance Company, Inc. is an insurance company duly organized and existing under and by virtue of the laws of the Republic of the Philippines. As such, petitioner issues customs bonds to its clients in favor of the BOC. These bonds secure the release of imported goods in order that the goods may be released from the BOC without prior payment of the corresponding customs duties and taxes. Under these bonds, petitioner and its clients jointly and severally bind themselves to pay the BOC the face value of the bonds, in the event that the bonds expire without either the imported goods being re-exported or the proper duties and taxes being paid. On December 9, 2003, the Republic, represented by the BOC, filed a Complaint dated December 3, 20033against petitioner for Collection of Money with Damages before the Regional Trial Court, Branch 20 in Manila. The case was docketed as Civil Case No. 03108583, entitled Republic of the Philippines represented by the Bureau of Customs v. Philippine British Assurance Company, Inc. It was alleged in the Complaint that petitioner had outstanding unliquidated customs bonds with the BOC.
1avvph!1

After hearing, the trial court issued a Decision dated September 21, 2006, 4 the dispositive portion of which states: PREMISES CONSIDERED, the Court finds for the Plaintiff Republic of the Philippines represented by the Bureau of Customs and the defendant British Assurance Company, Inc., is hereby ordered to pay the plaintiff the amount of Php736,742.03 representing defendants unpaid/unliquidated customs bonds plus legal interest from the finality of this Decision. Defendants counterclaims are hereby DISMISSED. SO ORDERED. From such Decision, petitioner filed a motion for reconsideration which the trial court denied in an Order dated February 5, 2007. Thus, petitioner appealed the Decision to the CA. The CA thereafter issued the first assailed Resolution dated July 23, 2008 dismissing the case for lack of jurisdiction. Petitioner, thus, filed a Motion for Reconsideration dated August 11, 2008. 5 It was, however, denied by the CA in its second assailed Resolution. Hence, we have this petition. The Issues A.

The [CA] committed serious error of law when it ruled that it has no jurisdiction over the appeal and the same lies with the Court of Tax Appeals because the instant case is a tax collection case. B. The [CA] committed serious error of law when it failed to rule that customs bonds are in the nature of a contract between the surety and the Bureau of Customs.6 The Courts Ruling This petition must be granted. The CA Has Jurisdiction over the Instant Case The CA ruled in the first assailed Resolution that it had no jurisdiction over the subject matter of the appeal, thus: With the foregoing in mind, it cannot be denied that the issuance of such bonds is rooted on, based upon, and interrelated with the payment of taxes and customs duties. Strictly speaking, therefore, BOCs suit against British Assurance is one for collection of taxes. Taking in mind that this appeal, filed on March 13, 2007, involves a tax case decided by the RTC in the exercise of its original jurisdiction, it necessarily follows that jurisdiction over the same is with the Court of Tax Appeals pursuant to Republic Act No. 9282. 7 On the other hand, petitioner argues that "in as much as Respondents right was initially based on its right to collect duties and taxes, the same was converted to a right arising out of a contract, the bond being a contract between Respondent and Petitioner x x x."8 In support of such contention, petitioner cites Republic of the Philippines v. Mambulao Lumber (Mambulao),9 wherein we ruled: Although the original obligation of the lumber company arose from non-payment of taxes, the complaint against said Company and the Surety is predicated upon the bond executed by them. In other words, plaintiffs right originally arising from law has become a right based upon a written contract, enforceable within ten (10) years x x x. We agree with petitioners contention. Republic Act No. (RA) 928210 amended Section 7 of RA 1125 to read as follows: Section 7. Section 7 of the same Act is hereby amended to read as follows: "Sec. 7. Jurisdiction. - The CTA shall exercise: "a. Exclusive appellate jurisdiction to review by appeal, as herein provided: xxxx

"3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction. (Emphasis supplied.) In the instant case, the original complaint filed with the trial court was in the nature of a collection case, purportedly to collect on the obligation of petitioner by virtue of the bonds executed by it in favor of respondent, essentially a contractual obligation. As petitioner correctly points out, an action to collect on a bond used to secure the payment of taxes is not a tax collection case, but rather a simple case for enforcement of a contractual liability. In Mambulao, Mambulao Lumber Company (MLC) was liable for deficiency sales tax to the Republic. The parties agreed to an installment plan, whereby MLC obligated itself to pay such obligation in 12 equal monthly installments. To secure the installment payments, MLC and Mambulao Insurance and Surety Corporation executed a surety bond in favor of the Republic. MLC defaulted in the payment of its obligation. Thus, the Republic proceeded against the surety bond. MLC sought the dismissal of the case against it on the ground of prescription, arguing that under Sec. 331, in relation to Sec. 183(A), of the National Internal Revenue Code (NIRC), internal revenue taxes must be assessed within five (5) years from the filing of the corresponding return. Thus, we ruled in that case that the NIRC was inapplicable to the case and that the Republic had ten (10) years from default of payment within which to collect the indebtedness of MLC. We explained that an action based upon a surety bond cannot be considered a tax collection case. Rather, such action would properly be a case based on a contract. In a more succinct ruling in Republic of the Philippines v. Xavier Gun Trading, 11 we decided: The present actions by the government are for the forfeiture of the bonds in question. Although the subject matter of said bonds are internal revenue taxes, it cannot be denied that upon the execution of said bonds, the tax-payer, as principal and the bondsman, as surety, assumed a new and entirely distinct obligation and became subject to an entirely different kind of liability. Thus, it has been held: However, as soon as the bond was executed, the taxpayer assumed a second and entirely distinct obligation, and became subject to a new and entirely different kind of liability ... The new liability was voluntary and contractual. It was in form a direct and primary obligation, not to pay a tax, but to pay the sum of $12,635.00, defeasible only upon payment by the tax-payer of a certain amount, to be fixed by subsequent action of the Commissioner. No limitation was put upon the time within which the Commissioner was required to act in fixing such sum. Inasmuch as the Collector had the right to proceed immediately for the collection of the tax, it follows that he also had the right to require, as the price of forbearance from such action, a general promise to pay such amount as might be found due at any time, either before or after the expiration of the statutory period . . . (McCaughn v. Philadelphia Barge Co., 27 F [2d] 628)

The making of the bond gives the United States a cause of action separate and distinct from an action to collect taxes which it already had. The statutes now pleaded to bar the suit can not be extended by implication to a suit upon a subsequent and substituted contract. The postponement of the collection of taxes returned was a waiver of the statutory limitation of five years that would have applied had the voluntary return of the taxpayer stood and no bond been given. If there is any limitation applicable to a suit on the bond, it is conceded that it has not yet become effective. (United States v. Barth Co., 73 L. Ed. 746; U.S. 278279) (Emphasis supplied.) Verily, the instant case is not a tax collection case; hence, the CA has jurisdiction over the case. In addition, it must be stressed that even the BOC did not consider the case as one for tax collection. In its Complaint dated December 3, 2003, the BOC stated: 10. Plaintiff thus sent defendant PHILIPPINE BRITISH a letter dated October 5, 2001 informing said defendant that it had an outstanding unliquidated customs bonds with the Bureau of Customs in the sum of PHP 4,457,290.00 and that if defendant failed to explain within five days from receipt of such letter why these bonds have not been liquidated as set forth in Paragraph 6 hereof, then plaintiff will forfeit the said customs bonds and institute collection against the said bonds. x x x (Emphasis supplied.) Pursuant to such letter, the BOC instituted a complaint against petitioner for collection of money, decidedly not a tax collection case, before the trial court. Moreover, as correctly pointed out by petitioner, the BOC purposefully did not follow the procedure in the proper prosecution of a tax collection case. This may only be explained with the fact that the BOC itself did not consider the action that it instituted as a tax collection case. Certainly, the administrative agencies tasked with the prosecution of cases within their specific area of concern should know the nature of the action to be filed and the proper procedure by which they can collect on liabilities to it. Here, the BOCs actions reveal its position that indeed the case was not a tax collection case but an action for the enforcement of a contractual obligation. Hence, appellate jurisdiction over the petition properly lies with the CA and not the Court of Tax Appeals. WHEREFORE, this petition is GRANTED. The CAs July 23, 2008 and November 28, 2008 Resolutions in CA-G.R. CV No. 88786 are accordingly REVERSED and SET ASIDE. This case is hereby REMANDED to the CA for hearing on the merits. No costs. SO ORDERED. PRESBITERO J. VELASCO, JR. Associate Justice WE CONCUR:

RENATO C. CORONA Associate Justice Chairperson ANTONIO T. CARPIO* Associate Justice ANTONIO EDUARDO B. NACHURA Associate Justice

ARTURO D. BRION** Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. RENATO C. CORONA Associate Justice Chairperson CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice